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Depicting Inventory Changes in Financial Statements
December 10, 2023
How do financial statements reflect changes in a company's inventory?
Financial statements, particularly the balance sheet and income statement, account for changes in inventory. An increase in inventory results in higher assets on the balance sheet but may also lead to increased costs in the income statement (via cost of goods sold). Conversely, a decrease in inventory might indicate improved sales or efficient inventory management, impacting financial ratios like inventory turnover.
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