How does overstated ending inventory leads to overstated earnings?

Question

Quizplus · Accepted Answer

Overstated ending inventory leads to understated cost of goods sold, which in turn leads to overstated earnings. This is because cost of goods sold is subtracted from revenue to calculate gross profit, and an understated cost of goods sold results in an overstated gross profit (revenue minus cost of goods sold). This ultimately leads to an overstatement of earnings.

How Does Overstated Ending Inventory Leads to Overstated Earnings