What correctly defines change of inventories of a firm during a year?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. Production of the firm during the year – Sale of the firm during the year.
The change of inventories of a firm during a year is correctly defined as:
Production of the firm during the year – Sale of the firm during the year.
This represents the difference between what the firm produces and what it sells in a given year. If production exceeds sales, the inventory increases, while if sales exceed production, the inventory decreases. This calculation is vital for assessing a firm's stock levels and overall economic contribution during the year.