During a Period of Rising Prices and Inventories, a Company

question 106

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) Averaging
• D) The company would be indifferent as to which cost flow assumption is adopted.

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