If the financial statements show a trend of increased profit margin combined with an increase in the number of inventory turnover in days, _______.

Question

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An increase in profit margin combined with an increase in the number of inventory turnover in days could indicate that the inventory may be overstated. This means that the value of the inventory on the balance sheet may be higher than its actual value in the market, which would result in an increase in profit margin but a longer time to sell the inventory. This could be due to several reasons, such as overproduction, overstocking or a decrease in demand for the products.

If the Financial Statements Show a Trend of Increased Profit