During Periods of Rising Prices, and Being Primarily Concerned with Tax

question 144

Multiple Choice

During periods of rising prices, and being primarily concerned with tax implications, most companies would select:

• A) LIFO.
• B) FIFO.
• C) Specific identification.
• D) The inventory valuation does not affect taxation.

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Definitions:

Alpha

In investing, alpha is a measure of the performance of an investment relative to a suitable benchmark index, indicating excess or deficient return.

Security

A financial instrument representing ownership in a publicly-traded corporation (stock), a creditor relationship with a government or corporation (bond), or rights to ownership as represented by an option.

Rate of Return

The profit or deficit from an investment during a designated time frame, represented as a fraction of the investment's initial value.

Security Market Line

A graphical representation that shows the relationship between the risk of an investment and its expected return, based on the capital asset pricing model.