Inventory Turnover In the Spaces Provided, Indicate the Likely Effect of Each

question 141

Essay

Inventory turnover
In the spaces provided, indicate the likely effect of each of the following events or strategies upon the inventory turnover rate. Use the following code letters: I for Increase, D for Decrease, NE for No Effect and U for Uncertain..
(a) Switched from the LIFO flow assumption to FIFO during a period of rising prices. _____
(b) Dramatically increased advertising expense. ______
(c) Increased the sales price of goods that is so popular it is difficult to keep in stock. ______
(d) Implemented internal control procedures to reduce a serious inventory shrinkage problem. ______
e) Switched from a restrictive credit policy to offering liberal terms to credit customers. ______

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Definitions:

Net Income

The amount of earnings remaining after all expenses, including taxes and interest, have been deducted from total revenues.

Ending Inventory

The total value of all goods available for sale at the end of an accounting period, calculated to evaluate stock levels and assess cost of goods sold.

Consignor

The party in a consignment agreement that provides goods to another party (consignee) to sell on their behalf, retaining ownership until the goods are sold.

Consignee

The individual or entity to whom goods are shipped and who is responsible for receiving the shipment and completing any customs paperwork.