Overstating the Ending Inventory Will Result in Understating the Cost

question 114

True/False

Overstating the ending inventory will result in understating the cost of goods sold and overstating profits.

---

Definitions:

Debt-Equity Ratio

A ratio enumerating the financial strategy involving the use of equity and debt for asset financing.

Maximum Sales

The highest amount of sales a company can possibly achieve within a given timeframe under existing conditions.

Constant Ratio

A strategy or measure that remains unchanged over a period of time, often used in financial contexts to describe stable investment proportions or fixed financial ratios.

Retained Earnings

Represents the portion of net income that is not distributed to shareholders but retained by the company for reinvestment in its operations or to pay debt.