Which of the following ratios increases when a company switches from FIFO to LIFO during a period of increasing unit costs?
A)Net profit margin.
B)Inventory turnover.
C)Quick.
D)Current.

Question

Quizplus · Accepted Answer

When a company switches from FIFO to LIFO during a period of increasing unit costs, the cost of goods sold (COGS) will increase, which will lower the net profit margin. However, because LIFO will value inventory at a lower cost (the most recently purchased goods), the inventory turnover ratio will increase. Quick and current ratios are not affected by the method of inventory accounting.

Which of the Following Ratios Increases When a Company Switches