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In the event that the company's initial inventory is exaggerated, the cost of goods sold will also be overstated, which will result in an understatement of the reported net income.
What is net income?
In the context of business and accounting, net income, also referred to as total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales, refers to an entity's income less cost of goods sold, expenses, depreciation and amortization, interest, and taxes for a particular accounting period.
The net increase in shareholders' equity that results from a company's operations has also been used to characterize it. It is determined by subtracting all expenses and losses from all earnings and revenues for the time period. It differs from gross revenue.
To learn more about net income from the given link:
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