If all things are equal,except one company uses LIFO during inflation and the other uses FIFO,then:
A)The LIFO company will have a higher inventory turnover.
B)The FIFO company will have a higher inventory turnover.
C)The two companies will have the same inventory turnover.
D)The two companies will rely upon an industry inventory turnover measurement.

Question

Quizplus · Accepted Answer

During inflation, the LIFO (Last In, First Out) method results in higher cost of goods sold because it uses the most recent, higher-cost inventory first. This leads to lower ending inventory balances compared to FIFO (First In, First Out), which uses older, lower-cost inventory. Consequently, the LIFO company will have a higher inventory turnover ratio because this ratio is calculated by dividing the cost of goods sold by the average inventory. Lower ending inventory (as seen with LIFO) results in a higher inventory turnover ratio.

If All Things Are Equal,except One Company Uses LIFO During