Explain Why the Lower of Cost or Market Rule Is

question 56

Essay

Explain why the lower of cost or market rule is used to value inventory.

---

Definitions:

Zero Growth

refers to a situation where a company or economy is not experiencing any increase in its output, sales, or other financial indicators over a period.

Cumulative Dividend

A feature of preferred stock that mandates the payment of any missed dividends before dividends can be distributed to other shareholders.

Arrearage

A legal term for the part of a debt that is overdue after missing one or more required payments.

Preferred Shareholders

Investors who own preferred shares in a company, giving them priority over common shareholders in the distribution of dividends and assets.