If the revenues are correctly reported and the gross profit of a company is understated, what is the effect on stockholders' equity?

A) understated
B) overstated
C) correctly stated
D) none of these

Gross Profit

The financial metric calculated by subtracting the cost of goods sold from sales revenue, indicating the efficiency of a company in managing its production and labor costs.

Stockholders' Equity

Equity of shareholders refers to the ownership interest in a company, calculated as the difference between the company's total assets and total liabilities.

Revenues

The income generated from normal business operations and other activities over a period of time.