If historical cost profits are all distributed in dividends during times of rising inventory prices,this will lead to (assuming other things being equal):

Question

Quizplus · Accepted Answer

During times of rising inventory prices, distributing all historical cost profits as dividends can lead to an erosion of operating capacity. This is because the cost of replacing inventory items at higher current prices may not be fully covered by the profits calculated using historical costs, potentially leading to a reduction in the ability to maintain or expand operations.

If Historical Cost Profits Are All Distributed in Dividends During