- CFA Exams
- CFA Level I Exam
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 25. Inventories
- Subject 6. Financial Analysis of Inventories
CFA Practice Question
Compared with LIFO, FIFO results in a ______ when prices are rising.
A. lower inventory balance and lower net income
B. lower inventory balance and higher net income
C. higher inventory balance and higher net income
User Contributed Comments 2
| User | Comment |
|---|---|
| mickys | how does it end up in higher NI? |
| najat | because with FIFO, COGS is made of older prices (and inventory value made of the more current ones) so COGS is smaller with FIFO than with LIFO, and NI therefore is higher. |