The Financial Times reported that Delphi, Inc., a manufacturer of automotive parts, would take a \($100\) million write-down of its inventory to reflect reduced demand for some of its products.

The write-down was part of the company’s efforts to restructure its money-losing operations. Discuss what accounting principle is being followed by Delphi when it implements the inventory write-down. Discuss how the write-down will affect the company’s financial statements. Discuss how the write-down will affect the company’s inventory turnover ratio and its inventory-on-hand period. Could an inventory write-down be used to manage earnings? If so, how?