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In Retail Business LIFO Mean Last In First Out. This Method used to estimate the ending inventory, csot of goods sold is acceptable for financial reporting purpose. The retail method can use FIFO LIFO. It is based on the relationship between cost and retail prices of inventory.
it depend of the materials, specially if there are shelf life for the material the impact will be huge loss, in some firms the LIFO is required and will increase the profitability by decreasing the stacking and delivering of the goods.
LIFO Means Last in First out. It will affect the previous stock and impact the date of expiry cause to huge loss to the company.It is not applicable for perishable goods.
Inventory Management System In times of cost increases, LIFO will result in a higher cost-of-goods expense, but lower end-of-period inventory values. However, in times of cost decreases, LIFO will result in a lower cost-of-goods expense, but higher end-of-period inventory values.
The LIFO should be higher cost of goods expenses during the increases of values, but lower end of the Inventory period.
Nothing it depends upon the production or demand.
From an analytical perspective, in a rising-price and stable- or increasing-inventory environment, it is better to use LIFO debt-to-equity ratio because the retained earnings are more representative of the current economic reality. For the time, interest-earned ratio is more relevant to use LIFO because EBIT will be lower and more representative of future interest-coverage protection. If the company is currently using FIFO, it is better they use the CFO generated by FIFO because the company cannot change the fact that it will have to continue paying higher taxes under this method.
Last-out (lifo): This method applies the inventory method, which assumes that items in the inventory are being sold first during the accounting year. Therefore, when the lifo method is applied, the inventory at the end of the year consists of the goods placed in stock at the beginning of the year, not at the end. During inflation, when prices rise, the lifo method gives less inventory ends, the higher the cost of goods sold, the gross profit is lower, and the taxable income is lower. Lifo style is preferred by many companies because it has an effect on the company's tax reduction and hence increased cash flow.
Te impact of LIFO depends upon the market fluctuation. If the cost of the inventory is increasing, LIFO will increase the Cost of Sales which will results to higher income and vice versa.
The Impact of a LIFO Inventory method is that , the ageing days of the unsold inventory will show as very high since the balance stocks are the oldest .
Again, in the financial statements, the value of Inventory will be very high compared to its actual market value. This is because, in most cases, the Inventory value gets deminished over time. In LIFO method, the balance inventory will be oldest and therefore the value will be the highest.
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