If Inventory Levels Are Stable or Increasing an Argument That

question 5

Multiple Choice

If inventory levels are stable or increasing an argument that favors the FIFO method as compared to LIFO is

• A) Income taxes tend to be reduced in periods of rising prices
• B) Cost of goods sold tends to be stated at approximately current cost in the income statement
• C) Cost assignments typically parallel the physical flow of the goods
• D) Income tends to be smoothed as prices change over time

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Definitions:

Capital Budgeting

The process a business undertakes to evaluate potential major projects or investments, analyzing the cash inflows and outflows to determine whether the returns meet a sufficient target benchmark.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity which finances its overall operations and growth.

Net Working Capital

It represents the disparity between an organization's short-term holdings and debts, signifying the state of its financial wellbeing and efficiency in operations.

Dealer

An individual or firm in the financial markets that buys and sells securities for their own account, rather than on behalf of clients.