CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Swimsuit Shop uses the FIFO inventory method. During a time of rising prices and constant inventory levels (in terms of quantity), Swimsuit Shop would experience ______ relative to LIFO method.
A. higher taxes
B. higher cash flows
C. higher cost of goods sold (COGS) and lower net income
Explanation: The sequence is: lower COGS --> higher net income --> higher taxes --> lower cash flows.

User Contributed Comments 1

User Comment
mickys Rising prices => higher COGS => lower gross profit => lower NI => lower taxes
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