- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 6. Analysis of Inventories
- Subject 2. The Effects of Inflation and Deflation on Inventories, COGS and Gross Margin
CFA Practice Question
During a time of increasing inventory and rising prices, FIFO will result in ______ than LIFO.
B. higher taxes
C. lower net income
D. lower working capital
A. higher COGS
B. higher taxes
C. lower net income
D. lower working capital
Correct Answer: B
User Contributed Comments 2
| User | Comment |
|---|---|
| guna | In FIFO, original prices < latest rising prices, so lower costs results in higher taxes |
| teddajr | Lower COGS -> Higher EB(I)T -> Higher taxes |