If the opening stock is overvalued, it leads to an inflated cost of goods sold (COGS) when calculating net profit. This is because the higher opening stock increases the total inventory costs, thus reducing the gross profit. Consequently, the overall net profit will be lower than it should be, potentially misleading stakeholders about the company's financial health.
Opening and closing stock directly impact gross profit by influencing the cost of goods sold (COGS). The formula for COGS is: Opening Stock + Purchases - Closing Stock. If opening stock is high or closing stock is low, COGS increases, reducing gross profit. Conversely, low opening stock or high closing stock decreases COGS, thereby increasing gross profit.
profit or loss
net profit will increase
i think Gross profit Will decrease
GROSS PROFIT = SALES - [OPENING STOCK + PURCHASES + DIRECT EXPENSES - CLOSING STOCK]... substitute if u have all the other values
Overstatement of closing stock will inflate profit and overstatement of opening stock will have an inverse effect.
Opening and closing stock directly impact gross profit by influencing the cost of goods sold (COGS). The formula for COGS is: Opening Stock + Purchases - Closing Stock. If opening stock is high or closing stock is low, COGS increases, reducing gross profit. Conversely, low opening stock or high closing stock decreases COGS, thereby increasing gross profit.
If Opening Stock is undervalued, this will result in your Cost of Sales being understated and therefore Gross and Net Profit being overstated. Of course, since Opening Stock in this period is the last period's Closing Stock, this would mean that Closing Stock in the last period was understated too, meaning that Net Profit in the last period was understated. That doesn't make it OK though!
profit or loss
stock is overvalued when its expected return is more than investor's required return
How do I find the opening stock when given the closing stock
true
true
overvalued blow out
net profit will increase
i think Gross profit Will decrease
GROSS PROFIT = SALES - [OPENING STOCK + PURCHASES + DIRECT EXPENSES - CLOSING STOCK]... substitute if u have all the other values