2A2M GLOBETRADE IS A RETAILER THAT BUYS VIRTUALLY ALL OF ITS MERCHAND...
58.
CSO: 2A2c
LOS: 2A2m
Globetrade is a retailer that buys virtually all of its merchandise from manufacturers in a
country experiencing significant inflation. Globetrade is considering changing its method
of inventory costing from first-in, first-out (FIFO) to last-in, first-out (LIFO). What
effect would the change from FIFO to LIFO have on Globetrade’s current ratio and
inventory turnover ratio?
a.
Both the current ratio and the inventory turnover ratio would increase.
b.
The current ratio would increase but the inventory turnover ratio would decrease.
c.
The current ratio would decrease but the inventory turnover ratio would increase.
d.
Both the current ratio and the inventory turnover ratio would decrease.