In a Period of Inflation, Which of the Following Combinations

question 138

Multiple Choice

In a period of inflation, which of the following combinations of accounting methods will yield the lowest amount of current earnings?

• A) LIFO and double-declining-balance method
• B) FIFO and straight-line method
• C) LIFO and straight-line method
• D) FIFO and double-declining-balance method

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Definitions:

Total Rate of Return

The comprehensive yield on an investment over a specific period, considering both capital gains and dividends or interest, expressed as a percentage of the initial investment.

Dividend Growth Model

A valuation method that estimates the price of a company’s stock based on the dividend per share and the dividend growth rate.

Constant Rate

A fixed rate, without variation or fluctuation over time.

Dividends

Dividends are payments made by a corporation to its shareholder members, usually derived from the company's profits.