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scruge

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tT
发表于 2011-7-13 13:48 | 只看该作者

Why Is cash-flow higher under LIFO?

there, under, higher
Hi guys, why is cash-flow higher under LIFO than FIFO? I'm sure there is an obvious explanation but it is escaping me. Thanks!

 

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dece2011

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发表于 2011-7-13 13:48 | 只看该作者
it is not a rule

thats if you have rising inv costs

under lifo that will cause you to have more expenses

pay less taxes

thus higher cash flows

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waldziuchna

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发表于 2011-7-13 13:48 | 只看该作者
If prices are rising over the period AND inventory quantitites are stable or increasing, LIFO COGS will be greater than FIFO COGS. Therefore, LIFO pretax income would be lower, resulting in lower tax related cash outflows.

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smartpants

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发表于 2011-7-13 13:48 | 只看该作者
Thanks Ahmad! So cash flows aren't actually based on the actual prices paid by customers?? I'm confused. cheers

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