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Basic Question 1 of 10
An overstatement of ending inventory would result in an ______.
B. understatement of quick ratio
C. understatement of current ratio
D. overstatement of profit margin
A. overstatement of total asset turnover
B. understatement of quick ratio
C. understatement of current ratio
D. overstatement of profit margin
User Contributed Comments 5
| User | Comment |
|---|---|
| rainatt | ASSET TURNOVER=NET SALES/AVERAGE TOTAL NET ASSET |
| sarath | quick ratio = cash+marketable securities + Receivables / CL No inventory component so no effect on the quick ratio ... |
| guna | (OB+Purchases) - COGS = EI. If EI overstated, (OB+purchases) remains constant, only COGS should have been reduced to get an inflated EI. In the Income Statement COGS is like an expense, understating an expense would overstate Income |
| johntan1979 | :( I got this wrong because I confused profit margin with gross margin and thought net income should be NET profit margin, not just profit margin. |
| Inaganti6 | Wow i got something right and Johntan1979 didn't. Maybe I do stand a chance in this exam ! |
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Learning Outcome Statements
describe the presentation and disclosures relating to inventories and explain issues that analysts should consider when examining a company's inventory disclosures and other sources of information
CFA® 2025 Level I Curriculum, Volume 2, Module 6.