The inventory method used by a company will affect profitability by affecting the amount of income taxes a company owes.

Question

Quizplus · Accepted Answer

The inventory method used by a company, such as FIFO or LIFO, can impact the cost of goods sold and ultimately the amount of taxable income a company reports. This in turn affects the amount of income tax owed by the company, and thus can impact profitability.

The Inventory Method Used by a Company Will Affect Profitability