During a year of rising prices and increasing inventory, which cost flow assumption would yield the greatest current ratio?

Question

Quizplus · Accepted Answer

FIFO assumes that the first units purchased are the first units sold, resulting in lower cost of goods sold and higher ending inventory values compared to LIFO. In a year of rising prices and increasing inventory, FIFO would yield the highest current ratio as it would have a larger inventory value than LIFO. Average cost method is not the best choice as it takes into account the cost of all the units purchased, which may cause fluctuations in cost of goods sold and inventory value.

During a Year of Rising Prices and Increasing Inventory, Which