During Inflation, the Best Method to Use in Inventory Valuation

question 53

Multiple Choice

During inflation, the best method to use in inventory valuation that produces the smallest amount of profit is:

• A)LIFO
• B)FIFO
• C)Specific invoice
• D)Weighted average
• E)None of these

---

Definitions:

Factoring

A financial transaction and a type of debtor finance where a business sells its accounts receivable to a third party (the factor) at a discount.

Net Working Capital

measures a company's short-term financial health by subtracting its current liabilities from its current assets, indicating the liquidity available to fund day-to-day operations.

Accounts Receivable

Unsettled financial obligations to a corporation from its customers for products or services already delivered or engaged in, awaiting payment.

Accounts Payable

Money owed by a business to its suppliers shown as a liability on the company’s balance sheet.