You are hired as a consultant to evaluate a firm (Company A) and its competitor (Company B) with respect to how efficiently they manage their inventory (i.e., how long does inventory sit around before it is sold). You begin by looking at the income statements and balance sheets of these two firms you obtain the following information:

	Company A	Company B
Sales for 2022	137,500	127,500
Cost of goods sold for 2022	55,000	51,000
Ending Inventory for 2022	10,000	9,000
Beginning Inventory for 2022	10,000	8,000

Digging a little deeper into their annual reports you learn that Company A uses first-in, first out (FIFO) for inventory, but Company B uses last-in, fist out (LIFO). You also find Company B’s inventory footnote, which states the following:

Inventories: The majority of inventory for the firm is valued at cost using the “last-in, first out” LIFO method.

Which company does a better job managing its inventory? Explain your answer in written format & math (if necessary).

Answer rating: 100% (QA)

Average inventory Opening inventoryClosing inventory2 A B Opening inventory 1000... View the full answer