Let’s say that two companies, identical in every way except that one used FIFO and one used average cost, went into a bank on the same day to get a loan to deal with the rising cost of acquiring inventory. Despite the fact that they both engaged in the same transactions at the same dollar values, one company reported higher net income and higher total assets on the financial statements. Which one was it? If the banker made the decision based on the company that would have better cash flow associated with the inventory costing method choice, which company would have received the loan?

  • CreatedJuly 08, 2015
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