Inventory valuation methods are based on the systematic cash flow of adding and removing inventory costs. Each method has its advantages and disadvantages. When selecting an inventory method, management should select the method that best reflects operational needs. Last in, first out (LIFO) and first in, first out (FIFO) are two of the inventory methods that we have discussed. Assume that you are investing in a publicly traded company during a period of rising prices. Would you prefer that the company use LIFO or FIFO for inventory valuation? Please support your response.

Inventory valuation methods are based on the systematic cash flow of adding and removing inventory costs. Each method has its advantages and disadvantages. When selecting an inventory method, management should select the method that best reflects operational needs. Last in, first out (LIFO) and first in, first out (FIFO) are two of the inventory methods that we have discussed. Assume that you are investing in a publicly traded company during a period of rising prices. Would you prefer that the company use LIFO or FIFO for inventory valuation? Please support your response.

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Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter9: Operating Activities

Section: Chapter Questions

Problem 7QE

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