Page 16 - FINAL CFA I SLIDES JUNE 2019 DAY 8

LOS 28.h: Describe implications of valuing
inventory at net realisable value for financial Session Unit 8:
statements and ratios. p 193 28. Inventories

Lower of cost & NRV/Write downs will:

A L E R E Profit OCS ICF FCF

Decreased Decreased Increase Reduced
total assets D/E d COGS GP/EBIT/Net Income
increase
Current ratio Decrease
tanties
Quick ratio No impact

Inventory turnover Increase
(COGS/average inventory
Asset turnover Increase

D/A Increase

ROA/ROE Reduce (% decrease
in net income > %
decrease in A or E

Reverse is true for write-ups!