CHAPTER 3: INVENTORY EVALUATION

What is the primary purpose of inventory evaluation?

• To determine the selling price of products

• To assess the financial health of a company

• To manage customer relationships

• To evaluate employee performance

Which inventory valuation method assumes that the oldest inventory items are sold first?

• FIFO (First-In, First-Out)

• LIFO (Last-In, First-Out)

• Weighted Average Cost

• Specific Identification

In which scenario would a company most likely use the LIFO (Last-In, First-Out) inventory method?

• When prices are rising

• When prices are falling

• When inventory turnover is low

• When all products have the same cost

What does the term "carrying cost" refer to in inventory management?

• The cost of purchasing inventory

• The cost associated with storing and maintaining inventory

• The cost of selling inventory

• The cost of financing inventory purchases

Which financial statement reflects the value of ending inventory?

• Income Statement

• Balance Sheet

• Cash Flow Statement

• Statement of Retained Earnings

Which ratio is commonly used to assess how efficiently a company manages its inventory?

• Current Ratio

• Quick Ratio

• Inventory Turnover Ratio

• Debt-to-Equity Ratio

The FIFO (First-In, First-Out) method assumes that the most recently produced items are sold first.

• TRUE

• FALSE

Using the LIFO (Last-In, First-Out) method during periods of rising prices results in a lower cost of goods sold and a higher net income.

• TRUE

• FALSE

The weighted average cost method is the most commonly used inventory valuation method.

• True
• False

Inventory valuation methods have no impact on a company's cash flow.

• TRUE

• FALSE