Using LIFO Rather Than FIFO in a Time of Rising

question 63

Multiple Choice

Using LIFO rather than FIFO in a time of rising prices:

I. lowers the current ratio.
II. increases inventory turnover.
III. increases profit margin.
IV. increases debt to equity ratio

• A)I, II, and IV
• B)I and II
• C)II and III
• D)I only

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Definitions:

Book Balance

refers to the current balance in a company’s accounting records, not including any pending transactions that have not yet been cleared or settled.

Net Collection Float

The time difference between when a check is deposited and when the funds are available in the firm's account, affecting available cash.

Net Disbursement Float

The time difference between when a check is issued by a company and when the funds are actually withdrawn from the company's bank account.

Outstanding Checks

Checks that have been written and recorded in the account ledger but not yet cashed or cleared by the bank.