Agde Ltd recently produced draft financial statements for the most recent year. Soon after the statements were$$ prepared, it was discovered that an expensive piece of equipment purchased at the year end for use within the business had been treated as part of the closing inventories.

A colleague has suggested that the effect of correcting this error would mean$$ that:

$1.$

Sales to capital employed ratio will decrease.

$2.$

Average inventories turnover period will decrease.

Are the above statements true or$$ false?

Question content area bottom

Part $1$

$$Statement $1$ Statement $2$

A$.$

True True

B$.$

False True

C$.$

False False

D$.$

True False