Inventory fraud often involves overstating inventory and/or understating cost of goods sold. The result is a decrease in the:
A) gross profit ratio.
B) inventory turnover ratio.
C) number of days sales in inventory.
D) accounts receivable turnover ratio.

Question

Quizplus · Accepted Answer

Overstating inventory and/or understating cost of goods sold results in a higher ending inventory, which decreases the inventory turnover ratio (Cost of Goods Sold/Average Inventory).

Inventory Fraud Often Involves Overstating Inventory And/or Understating Cost of Goods