During a Period of Rising Prices and Inventories, a Company

question 66

Multiple Choice

During a period of rising prices and inventories, a company whose debt/equity ratio is dangerously close to the minimum specified by agreement with a major creditor would prefer which cost flow assumption?

• A)FIFO
• B)LIFO
• C)Average
• D)The company would be indifferent as to which cost flow assumption is adopted.

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Definitions:

Illegal Control

Unauthorized or unlawful dominance or influence over an entity, market, or activity.

Prices

The amount of money required to purchase a good, service, or asset.

Oligopolies

Market structures characterized by a small number of firms dominating the market, often leading to limited competition.

Horizontal Demand Curve

Represents a situation in which the demand for a product is perfectly elastic, indicating that consumers are willing to purchase any quantity of the product at a specific price.