Financial Reporting and Analysis Q245
- Option : C
- Explanation : In periods of rising prices FIFO results in a higher inventory value and a lower cost of goods sold and therefore a higher net income. The higher net income increases return on sales. The higher reported net income also increases retained earnings, and therefore results in a lower debtto-equity ratio not a higher one. The combination of higher inventory and lower cost of goods sold decreases inventory turnover (CGS/inventory).
