Which of the Following Is NOT True About the Inventory

question 109

Multiple Choice

Which of the following is NOT true about the inventory turnover ratio?

• A) It is calculated by dividing inventory by cost of goods sold.
• B) It measures how many times the inventory is turned over into saleable products.
• C) The more times a firm can turn over its inventory, the better.
• D) Too high a turnover or too low a turnover could be a warning sign.

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Definitions:

Impairment of Assets

A decrease in the recoverable value of an asset below its carrying amount, leading to an adjustment of its valuation on the balance sheet.

Financial Position

The status of the assets, liabilities, and equity of an entity as detailed in the balance sheet, indicating the entity’s economic resources and obligations at a given time.

AASB 101

The Australian Accounting Standards Board guideline concerning the presentation of financial statements.

Corporations Act

A major legislation regulating corporate entities in some jurisdictions, detailing rules on incorporation, management, shareholders, and financial reporting.