Yang Liu CFA is comparing the financial performa
Yang Liu, CFA, is comparing the financial performance of a firm that presents its results under IFRS to that of a firm that complies with U.S.GAAP. the U.S. firm uses the LIFO method for inventory accounting, and the other firm uses FIFO method. If Liu performs the appropriate adjustments to make the U.S. firm’s financial statements comparable to the firm that reports under IFRS, her adjustments are least likely to change the firm’s:
A. quick ratio.
B. debt-to-equity ratio.
C. cash conversion cycle.
参考解答
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2024-11-08 13:47:30
Ans:A.
The analyst should add the U.S.GAAP firm’s LIFO reserve to its balance sheet inventory and subtract the change in the LIFO reserve from its COGS. This adjustment will increase the firm’s total assets and change its pretax income, income taxes, net income, and retained earnings (increasing them if the LIFO reserve increased, or decreasing them if the LIFO reserve decreased). These adjustments will change the firm’s debt-to-equity ratio by changing total equity, and change the cash conversion cycle by changing inventories. The adjustments do not change current liabilities or current assets other than inventories, so the quick ratio is not affected.
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