Why Is cash-flow higher under LIFO? there, under, higher

scruge

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!

smartpants

Thanks Ahmad! So cash flows aren't actually based on the actual prices paid by customers?? I'm confused. cheers

dece2011

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

waldziuchna

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.