Asked by Rebekah Hilton on May 04, 2024
Verified
The choice of an inventory valuation method has little to no impact on gross profit and cost of sales.
Inventory Valuation Method
A system used by businesses to assess the cost of their inventory, affecting financial statements and taxation.
Gross Profit
The financial metric calculated by subtracting the cost of goods sold from the net sales, representing the profit from sales before deducting operating expenses.
- Determine the effects of inventory valuation methods on financial ratios and business decision-making.
Verified Answer
MB
Mohamed BezzineMay 09, 2024
Final Answer :
False
Explanation :
The choice of inventory valuation method can have a significant impact on gross profit and cost of sales, as it affects the way that the cost of goods sold is calculated. For example, using the FIFO method may result in a higher gross profit and lower cost of sales compared to using the LIFO method in a period of rising prices.
Learning Objectives
- Determine the effects of inventory valuation methods on financial ratios and business decision-making.
Related questions
Carp Corporation Has Provided the Following Information for Its Most ...
The Option to Value Inventory at Fair Value Exists Under \(\begin{array} ...
Inventories Are Defined by IFRS as ...
In the First Month of Operations Mordica Company Made Three ...
Inventory Items on an Assembly Line in Various Stages of ...