Explain how LIFO, FIFO, and Weighted average inventory systems will have different affects on a firm’s income statement and balance sheet. If a firm was concerned about reducing their tax burden, which inventory system would best benefit them? Assume costs have been steadily rising over time

Q: Why do better decisions regarding the purchasing and managing of goods for sale frequently cause…

A: Costing: Costing is a technique used in cost accounting to determine the cost of a product. With the…

Q: price-earnings ratio that is higher than other similar firms

A: A high price-earning ratio implies more price has to be paid for acquiring the stocks of the firm…

Q: Indicate whether a company interested in minimizing its income taxes should choose the FIFO orLIFO…

A: FIFO - First In First Out LIFO - Lase In First Out

Q: How can managers determine the breakeven point or the output needed to achieve a target operating…

A: Lets start with the basic understanding of break even point. Break even point is a point at which…

Q: The degree of operating leverage cannot be used to compare companies. measures how much of each…

A: Operating leverage is a financial efficiency ratio which is used to measure the effectiveness of…

Q: From the following: What is the industry average price–earnings ratio? What is Ragan’s…

A: The industry average PE ratio can be calculated as follows : P/E ratio = Price earningsPutting…

Q: If inventory is being valued at cost and the price level is steadily rising, which of the three…

A: Inventory can be defined as a form of asset which is held by a business firm for resale purposes.…

Q: Like many technology companies, TechnoTools operates in an environment of decliningprices. Its…

A: The last in, first-out (LIFO) is a system utilized to store reports of the latest items first…

Q: Which of the following limitation in using ratio analysis best describes the following statement:…

A: Ratio analysis are used to determine the profitability of business using various ratios and…

Q: When the return on sales (also known as net profit margin) is negative, what does this mean? Group…

A: Net profit margin (NPM) or return on sales measures the profitability of the company. Higher the…

Q: Suppose a company increases the price of its product and demand hardly declines.which of the…

A: The increase in the price off the product where the demand hardly declines will lead to increase in…

Q: Explain what the significance of having a high/low Price-to-Book ratio means about the company's

A: Price/Book value is ratio of stock price in actual market and book value is value of share as books…

Q: If one firm is growing rapidly and another is not, how might this distort a comparisonof their…

A: It is a financial measure that is used to evaluate as to how many times a company sells or uses its…

Q: If costs are declining, will the LIFO or FIFO method of inventory valuation yield the lower cost of…

A: Inventory cost flow assumptions: These are the methods used by the companies to compute the cost…

Q: Explain why some companies can influence many of their ratios simply by choosing their fiscal…

A: Solution Concept Financial ratios are the tools and technique used to measure the performance of the…

Q: Suppose you were comparing a discount merchandiser with a high-end merchandiser.Suppose further that…

A: The profitability of firm can be measured by computing Return on equity (ROE). It determines the…

Q: Which of the following statements about the quality of earnings ratio is true? Multiple Choice…

A: Lets understand the basics. Quality of earning ratio indicates the cashflow from operating activity…

Q: What would be a reason a company would want to understate income?A. to help nudge its stock price…

A: Profitability of the business is an important measure for business evaluation. It depends on the…

Q: During a period of rising inventory costs and stable output prices, describe how net income and…

A: First in first out Method (FIFO) First in first out method is one of the popular method which was…

Q: If the company reduces inventory without affecting sales, what effect should this have on the…

A: Inventory is the term which is defined as the goods as well as the materials that the company holds…

Q: Identify which of the statements below are true (T) or false (F). Lean businesses aim to: Reduce…

A: Lean businesses aim to: Reduce inventory levels--true

Q: If a firm sold some inventory on credit, its current ratio would probably not change much, but its…

A: Current ratio is defined as the liquidity ratio, which used to measure an ability of the company for…

Q: Which of the following statements is true?

A: Companies tries to use the methods of the inventory valuation so that the tax liability of the…

Q: In general, it's better to have a low inventory turnover ratio than a high one, as a low ratio…

A: The financial ratios refer to the ratios that are calculated using the financial data from the…

Q: Income taxes have the effect of A. increasing the cost of debt for a firm. B. decreasing the cost of…

A: Income tax is a compulsory payment made to government on income earned during financial year. Income…

Q: If inventory is being valued at cost and the price level is steadily rising, which of the three…

A: Introduction:

Q: when a client notices a discrepancy between annual profits calculated by the accountant versus your…

A: 1. Accountant’s Cash-based Profit: The accounting method in which the revenue is the amount of cash…

Q: How can managers determine the breakeven point or the output needed to achieve a target operating…

A: The break-even point is defined as the moment at which profit or loss equals zero. A break-even…

Q: n a period of rising prices, which method would yield the lowest ending inventory, highest net…

A: Inventory valuation refers to the methods used by the company to determine the value of its…

Q: net realisable value of inventory would ______ cost.

A: Net Realizable value is the value received upon selling the asset less estimated cost to sell the…

Q: What does the inventory turnover period ratio measure? Select one: a.Profitability. b.The average…

A: INVENTORY TURNOVER PERIOD RATIO IS A FINANCIAL RATIO SHOWING HOW MANY TIMES AN ORGANISATION HAS SOLD…

Q: How does the inventory accounting choice (LIFO/FIFO) impact a firm's valuation? a)Deferring tax…

A: LIFO - Last in First Out method of inventory valuation is based on the concept that the newest…

Q: Corporation has a lower price/earnings (P/E) ratio than another firm engaged in the same business,…

A: Step 1   The PE ratio is calculated by dividing the latest trading price of a company's stock by its…

Q: Which of the following statements is true regarding the lower of cost or net-realizable value (NRV)?…

A: Inventory means the stock of goods in which the businessmen deals. Every company wants to maintain…

Q: A firm that uses LIFO accounting for inventory in times of rising investory costs will always report…

A: FIFO First in first out method is a method of inventory accounting wherein the units of goods…

Q: In competitive markets economic profit becomes zero in the long-run. However, it is also possible…

A: Economic profits and losses play a crucial role in the model of perfect competition. The existence…

Q: Which cost flow assumption generally results in the highest reported amount of net income when…

A: FIrst in first out or FIFO cost flow assumption provides highest net income when inventory prices…

Q: Th e Industry and Business Risk excerpt states that, “Increased competition may lead tolower unit…

A: If prices are decreased, write downs under FIFO are least probably to have a considerable impact as…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.