An Understatement of Ending Inventory Will Cause an Understatement of Assets

question 123

True/False

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

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Definitions:

ROA

Return On Assets indicates how efficiently a company utilizes its assets to generate profit, calculated as net income divided by total assets.

Total Assets

The total of everything of value owned by a company, including cash, investments, property, and equipment, as recorded on the balance sheet.

Operating Efficiency

A measure of how well a company uses its assets and liabilities internally to produce a profit.

Financial Efficiency

A measure of how well a company utilizes its assets and manages its liabilities to generate income, often assessed through ratios such as return on assets or equity.