PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 30, Problem 3PS
Inventory* True or false?
- a. Just-in-time inventory systems reduce the cost of managing inventory to zero.
- a. Companies hold larger inventories of finished goods when customer demand fluctuates unpredictably.
- b. Other things equal, higher real interest rates should lead to lower inventories.
- c. Other things equal, lower costs of storage should lead to lower inventories.
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Students have asked these similar questions
What is inventory shrinkage?
The difference between product cost and retail selling price.
The loss of sales revenue due to lowering sales prices.
The discrepancy between the perpetual system generated Inventory level and actual physical inventory on hand.
The inaccuracy of vendor invoices regarding what was physically shipped.
What would be the most favorable cost flow assumption method when calculating gross margin in a time of high inflation?
FIFO
Specific
LIFO
Average
Very high inventory turnover ratio relative to industry norms could possibly
indicate the company does not carry adequate inventory, so shortages could
potentialy hurt reverue. Select one: True False
Assuming rising inventory prices, which statement is correct?
Group of answer choices
A. FIFO reports a lower value for cost of sales than other methods
B. FIFO reports a lower value for closing inventory than other methods
C. Using FIFO, it is not possible to calculate whether cost of sales/inventory is lower or higher than it would be if other assumptions about inventory valuation were made
D. FIFO reports a lower profit than other methods
Chapter 30 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 30 - Prob. 1PSCh. 30 - Components of working capital True or false? a....Ch. 30 - Inventory True or false? a. Just-in-time inventory...Ch. 30 - Inventory What are the trade-offs involved in the...Ch. 30 - Prob. 5PSCh. 30 - Prob. 6PSCh. 30 - Prob. 7PSCh. 30 - Prob. 8PSCh. 30 - Prob. 9PSCh. 30 - Credit terms Phoenix Lambert currently sells its...
Ch. 30 - Prob. 11PSCh. 30 - Prob. 12PSCh. 30 - Prob. 13PSCh. 30 - Prob. 14PSCh. 30 - Prob. 15PSCh. 30 - Credit policy How should your willingness to grant...Ch. 30 - Prob. 17PSCh. 30 - Prob. 18PSCh. 30 - Prob. 19PSCh. 30 - Prob. 20PSCh. 30 - Cash management Complete the passage that follows...Ch. 30 - Prob. 22PSCh. 30 - Prob. 23PSCh. 30 - Prob. 24PSCh. 30 - Prob. 25PSCh. 30 - Prob. 26PSCh. 30 - Prob. 27PSCh. 30 - Prob. 28PSCh. 30 - Prob. 29PSCh. 30 - Prob. 30PSCh. 30 - Prob. 31PSCh. 30 - Prob. 32PSCh. 30 - Prob. 34PSCh. 30 - Prob. 35PSCh. 30 - Prob. 36PSCh. 30 - After-tax yields Suppose you are a wealthy...Ch. 30 - Prob. 38PSCh. 30 - Prob. 39PS
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- Which of the following is a disadvantage of the perpetual inventory system? A. Inventory information is in real-time. B. Inventory is automatically updated. C. It allows managers to make current decisions about purchases, stock, and sales. D. It is cost-prohibitive.arrow_forwardA high inventory turnover ratio provides evidence that a company is having problems with stockouts and disgruntled customers. Do you agree? Explain.arrow_forwardExplain why, in the traditional view of inventory, carrying costs increase as ordering costs decrease.arrow_forward
- A firm that uses LIFO accounting for inventory in times of rising investory costs will always report lower profit margins than if it used FIFO. Is this correct?arrow_forwardProponents of the LIFO Inventory cost flow assumption argue that this costing method is superior to the alternatives because it results In better matching of revenue and expense. Required: a. The recent purchase costs to the Cost of Goods Sold account results in better matching of revenue and expense. O True False b. What is the impact on the carrying value of Inventory in the balance sheet when LIFO rather than FIFO is used during periods of Inflation? O It understates the value of Inventory in the balance sheet. O It overstates the value of Inventory in the balance sheet.arrow_forwardWhich of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true? a.The LCNRV rule is an application of the cost principle. b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income. c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost. d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.arrow_forward
- 3. A low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged. * True Falsearrow_forwardCan you explain why the answer is B and not C. If inventory prices are decreasing wouldnt LIFO result in a lower COGS and which would lead to a higher Net income thus higher income tax expense?arrow_forwardIf costs are declining, will the LIFO or FIFO method of inventory valuation yield the lower cost of goods sold? Why?arrow_forward
- Which statements below are true? 1. LCM and LCNRV may be applied by individual products, by product category or by total inventory. 2. A firm that wants to minimize the negative impact of inventory write-down on net income should apply LCM or LCNRV by individual products. 3. If inventory write-down is usual and not substantial, a firm should debit "Loss on inventory write-down” and credit "Inventory". 4. LCM and LCNRV applied by total inventory will result in higher value of inventory and lower inventory write-down than by individual products, by product category. 5. If inventory write-down is unusual and substantial, a firm should debit "Cost of good sold" and credit "Inventory".arrow_forward2. Shepherd Cycles does not expect prices to change dramatically and wants to use a method that averages price changes. B. Which inventory method would best meet Shepherd's goal? Enter answer here. C. What if Shepherd wanted to expense out the newer purchases of goods instead? Which inventory would best meet that need? Enter answer here.arrow_forwardDon't use Ai and chatgpt. Answer in step by step with explanation.arrow_forward
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