CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Under the ______ method, inventory write-downs are less likely to occur than under other inventory methods (assuming a long-term environment of rising inventory costs).

A. LIFO
B. FIFO
C. Weighted average
Correct Answer: A

This is because LIFO inventories are valued at older and lower costs, and thus are less likely to be carried at values that are greater than their net realizable values.

User Contributed Comments 2

User Comment
quanttrader left with old (first in) inventory which will be less likely to be written down.
Antoinepo This comes from the assumption that price rise constantly, that's why LIFO make a ''cheaper'' inventory lowering the risks of a write-off
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