If cost of goods sold for the year was overstated, but all other financial statement items were properly reported, the calculated inventory turnover ratio would:
A)indicate the chance of running out of inventory was lower than it was.
B)indicate the company was more profitable than it actually was.
C)be unaffected by this error.
D)indicate that inventory was being turned over more times than it was.

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated as Cost of Goods Sold divided by Average Inventory. If the cost of goods sold is overstated, the ratio will be higher, indicating that inventory is being turned over more times than it actually is.

If Cost of Goods Sold for the Year Was Overstated