Which of the following would be the most useful ra
Which of the following would be the most useful ratio from a financial analysis perspective, rather than from an accounting perspective, assuming a rising price environment?
A. Calculating the current ratio by using the current assets determined with LIFO.
B. Determining the inventory turnover by using cost of goods sold prepared on a FIFO basis and average inventory prepared on a LIFO basis.
C. Determining the return on assets by using net income prepared on a LIFO basis and average total assets prepared on a FIFO basis.
参考解答
4j0***999
2024-11-01 14:40:47
Ans:C.
In a rising environment, the most useful ratio from a financial analysis perspective would be to calculate the return on assets by using the lower more conservative net income prepared on a LIFO basis and average assets (inventory) prepared on a FIFO basis (to include more current cost data in the inventory).
A is incorrect. Calculating the current ratio with current assets determined with FIFO, not LIFO, would be most useful to a financial analyst.
B is incorrect. The best measure to obtain an adjustment inventory turnover ratio would be to use cost of goods sold prepared on a LIFO basis and average inventory prepared on a FIFO basis (highest inventory). This choice is reversed.
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