For ratio analysis,a distortion in the current ratio under LIFO inventory costing may be adjusted by subtracting the LIFO reserve from current assets.

Question

Quizplus · Accepted Answer

The adjustment for a distortion in the current ratio under LIFO inventory costing involves adding the LIFO reserve to current assets, not subtracting it, to better reflect the current cost of inventory.

For Ratio Analysis,a Distortion in the Current Ratio Under LIFO