When Inventory Decreases with No Change in Throughput or Operating

question 67

Multiple Choice

When inventory decreases with no change in throughput or operating expenses, then:

• A) profit will increase and return on investment and cash flow will decrease.
• B) profit, return on investment and cash flow will increase.
• C) profit and cash flow will increase and return on investment will decrease.
• D) profit, return on investment and cash flow will decrease.

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Definitions:

Treasury Stock

Shares that were issued and subsequently reacquired by a company, held in its own treasury.

Stockholders' Equity

Represents the owners' residual interest in the assets of a corporation after deducting liabilities.

Prior Period Adjustment

Corrections of material errors related to a prior period or periods, excluded from the determination of net income.

Retained Earnings

The portion of a company's profits that is kept or retained for reinvestment in the business, rather than being distributed to shareholders as dividends.