An Understatement of Year 1's Beginning Inventory Will

question 114

Multiple Choice

An understatement of year 1's beginning inventory will

• A)cause year 2's gross margin to be overstated.
• B)cause year 1's cost of goods sold to be understated.
• C)cause year 2's gross margin to be understated.
• D)have no effect on year 1's gross margin.

Examine the effect of sales increases on retained earnings under constant profit margins.

Assess the sustainability of growth through calculations of retained earnings and need for external financing.

Understand how to analyze financial statements to determine ratios crucial for assessing operational capacity.

Calculate and interpret the capital intensity ratio.

---

Definitions:

Self-concept

An individual's perception of themselves, including beliefs about one's abilities, appearance, and personality.

Biologically Based

Pertains to characteristics or processes that are rooted in biological factors, including genetic, neurological, or physiological origins.

Looking-Glass Self

The concept that individuals develop self-images based on how they believe others perceive them.

Worse than Average Effect

The cognitive bias where individuals undervalue their own qualities and abilities in comparison to others.