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  • Lifo Vs Fifo: Not Responsible For Material Errors

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    Farin Kazi
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    This document compares LIFO and FIFO inventory methods, as well as capitalizing versus expensing long-lived assets and capitalizing versus operating leases. For inventory methods and long-lived assets, LIFO results in lower reported income, taxes, and cash flows from operations but higher working capital and cash flows from investing, while FIFO has the opposite effects. For leases, capitalizing results in higher cash flows from operations but lower cash flows from financing and working capital compared to operating leases.

    Original Description:

    Financial Statement Analysis Level 1 CFA

    Original Title

    FSA

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    This document compares LIFO and FIFO inventory methods, as well as capitalizing versus expensing long-lived assets and capitalizing versus operating leases. For inventory methods and long-lived assets, LIFO results in lower reported income, taxes, and cash flows from operations but higher working capital and cash flows from investing, while FIFO has the opposite effects. For leases, capitalizing results in higher cash flows from operations but lower cash flows from financing and working capital compared to operating leases.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    12 views1 page

    Lifo Vs Fifo: Not Responsible For Material Errors

    Uploaded by

    Farin Kazi
    This document compares LIFO and FIFO inventory methods, as well as capitalizing versus expensing long-lived assets and capitalizing versus operating leases. For inventory methods and long-lived assets, LIFO results in lower reported income, taxes, and cash flows from operations but higher working capital and cash flows from investing, while FIFO has the opposite effects. For leases, capitalizing results in higher cash flows from operations but lower cash flows from financing and working capital compared to operating leases.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 1

    LIFO VS FIFO

    While Price are stable or raising

    COGS
    Inventory
    Net Income
    Taxes
    Working Capital
    Cash Flows

    LIFO

    FIFO

    Higher
    Lower
    Lower
    Lower
    Lower
    Higher

    Lower
    Higher
    Higher
    Higher
    Higher
    Lower

    Long Lived Assets

    CFO
    CFI
    Total Cash flow
    Profitability Ratios (ROA / ROE)
    Debt Ratios (Debt/Assets)
    Income Disparity

    Capitalization

    Expensing

    Higher
    Lower
    Same
    Higher
    Lower
    Lower

    Lower
    Higher
    Same
    Lower
    Higher
    Higher

    Leases
    Capitalizing

    Operating

    CFO
    CFF
    Total Cash flow

    Higher
    Lower
    Same

    Lower
    Higher
    Same

    Working Capital
    Profitability Ratios (ROA / ROE)
    Debt Ratios (Debt/Assets)
    Income Disparity

    Lower
    Lower
    Higher
    Lower

    Higher
    Higher
    Lower
    Higher

    Not responsible for material errors


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