1. If Company A and Company B apply for a loan at their local bank and the bank bases its decision on net income, which company is more likely to obtain the loan? Explain.
2. What if the bank based its decision on cash flows associated with the inventory costing valuation method the company uses? Which company might be better positioned to obtain the loan? Elaborate your responses and provide an example as needed to support your assessment.

Answer rating: 100% (QA)

If the local bank bases its decision on net income Company A may be more likely to obtain the loan c... View the full answer