Asked by Jacob Rosmarin on Apr 28, 2024
Verified
Assuming continued inflation, a firm that uses LIFO will tend to have a(n) ________current ratio than a firm using FIFO, and the difference will tend to __________ as time passes.
A) higher; increase
B) higher; decrease
C) lower; decrease
D) lower; increase
E) identical; remain the same
LIFO
"Last In, First Out," an inventory management method where the most recently produced or acquired items are the first to be used or sold.
FIFO
An accounting and inventory method where the first items produced or acquired are the first ones to be sold or used, standing for "First-In, First-Out".
Current Ratio
A liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets.
- Evaluate the impact of inflation on accounting methods such as LIFO and FIFO and their effects on financial statements.
Verified Answer
Learning Objectives
- Evaluate the impact of inflation on accounting methods such as LIFO and FIFO and their effects on financial statements.
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