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The comparison of activity measures of different companies is complicated by the fact that: 1. only...

The comparison of activity measures of different companies is complicated by the fact that: 1. only one of the companies may have preferred stock outstanding. 2. dollar amounts of assets may be significantly different. 3. different inventory cost flow assumptions may be used. 4. the number of shares of common stock issued may be significantly different.

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Answer #1

Option '3' is correct

Different Inventory cost flow assumptions may be used.

The comparison of activity measures of different companies is complicated by the fact that different Inventory cost flow assumptions may be used. Inventory Cost flow assumption states that the cost of an Inventory item changes from when it is acquired or built and when it is sold. Because of this cost differential, management needs a formal system for assigning costs to inventory as they transition to salable goods.

Inventory cost flow assumptions such as

FIFO , LIFO, Specific Identification Method, Weighted average cost flow assumptions

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