Final answer:
Ignoring the market value of inventory can result in financial loss, reduced profitability, and misleading financial statements.
Step-by-step explanation:
When a company ignores the fact that the market value of its inventory is lower than its cost, it may result in several consequences.
- Financial Loss: Ignoring the market value of inventory can lead to financial loss for the company, as it may not be able to sell the inventory at a price that covers its original cost.
- Reduced Profitability: If the market value of inventory is lower than its cost, the company may experience reduced profitability, as it will not make as much profit when selling the inventory.
- Misleading Financial Statements: Ignoring the market value of inventory can result in misleading financial statements. The company's balance sheet may show a higher value for inventory than its actual worth, which can impact the company's overall financial health.