The Rights and Obligations Assertion for Inventory Relates to Which

question 22

Multiple Choice

The rights and obligations assertion for inventory relates to which of the following audit objectives?

• A) Inventory is properly classified, described and disclosed in the financial statements.
• B) The entity owns, or has the legal right to, all of the inventory on the balance sheet.
• C) All inventory on the inventory listing is included in the financial statements.
• D) All inventory owned by the entity at year-end is included on the balance sheet.

---

Definitions:

Contribution Margin Ratio

A measurement that shows how much of a company's revenue is available to cover fixed expenses and generate profit after variable costs are covered.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance premiums.

Profit Ratio

A financial metric that measures the amount of profit generated by a business relative to aspects of its operations, such as sales.

Break-even Sales

The amount of revenue required to cover total fixed and variable costs, resulting in a profit of zero.