Question
Let's assume you are analyzing two companies financial statements in the same industry eg.: ALX and PBC. Both businesses are organized as corporations and therefore
Let's assume you are analyzing two companies financial statements in the same industry eg.: ALX and PBC. Both businesses are organized as corporations and therefore must pay income taxes on their profits. Both companies manage large amount of inventories. A note to ALX financial statement shows that the company's inventory is shown at a cost that is fur below current market value of the inventory while PBC inventory cost which is very close to Answer the following questions and explain reasoning behind your answers. If we assume that the both companies are identical except for the method used in valuation of inventory: its current market value. (a) What method of inventory valuation is probably used by both companies? (b) Which company probably reporting the higher net income in recent years? (c) Which company's financial statement probably imply the highest inventory turnover rate? (d) Which company's financial statement probably imply the highest current ratio? (e) If both companies sold their entire inventory at the same sales prices, which company would you expect to report the larger amount of gross profit?
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