LokiDog2

dtrynoski Wrote:
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> Zimt AG wrote down the value of inventory in 2007
> and reversed the write down in 2008. Compared to
> ratios calculated if the write down had never
> occured, Zimt's reported 2007
>
> A. current ratio was too high
> B. gross margin was too high
> c. inventory turnover was too high
>
> The answer is C, but heres thier explanation:
> C is correct. The write down reduced the value of
> inventory and increasdd cost of goods sold in
> 2007. The higher numerator and lower denominator
> mean that inventory turnover ratio as reported was
> too high
>
> How would a write down increase COGS? Wouldnt it
> decrease it since your reporting a lower inventory
> cost per unit sold?


when youre writing something down, it is being impaired and it is being charged to the P&L my brother from another mother, therefore, it hits COGS, increasing, reducing inventory and increasing the ratio bros