You’re almost right, but there’s a slight correction needed. Depreciation typically refers to fixed assets, whereas the decrease in value of inventory is often termed as “inventory write-down” or “inventory obsolescence.”
If the amount of inventory write-downs decreases, it means less inventory is losing value, which would indeed lead to higher reported profits on the income statement, assuming all other factors remain constant. This improvement would positively affect the financial health of the company.
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