FIFO versus LIFO: Ratio Analysis. Presented below is financial data for two companies that are identical in every respect except that Company X uses the FIFO method to value its inventory and Company Z uses the LIFO method to value its inventory. Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio. Which of the two companies is the better investment opportunity? Why? Company X Company Z Sales... $110,000 49,500 27,750 21,000 64,000 $110,000 Cost of goods sold Net income .. Inventory. 60,000 17,250 10,500 53,500 22,000 Current assets Current liabilities.. 22,000
FIFO versus LIFO: Ratio Analysis. Presented below is financial data for two companies that are identical in every respect except that Company X uses the FIFO method to value its inventory and Company Z uses the LIFO method to value its inventory. Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio. Which of the two companies is the better investment opportunity? Why? Company X Company Z Sales... $110,000 49,500 27,750 21,000 64,000 $110,000 Cost of goods sold Net income .. Inventory. 60,000 17,250 10,500 53,500 22,000 Current assets Current liabilities.. 22,000
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter9: Stocks And Their Valuation
Section: Chapter Questions
Problem 5DQ
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