CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

If prices of a product are falling, the use of LIFO rather than FIFO will lead to ______.
A. higher working capital and higher net income
B. higher working capital and lower net income
C. lower working capital and higher net income
Explanation: COGS will be lower under LIFO in a period of falling prices, leading to higher net income and higher tax payments. Working capital will be higher, since the higher inventory value will outweigh the lower cash balance due to higher tax payments.

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