why would cash flow be higher for a LIFO company in a period of inflation? Isn’t cash flow the same under LIFO and FIFO since that’s just a diffeence in accounting?
thnx
Because of corp. income tax impact. In inflatory environment (normal environment) LIFO would generate higher tax savings, thus CF is not the same under different inventory methods.
Pretax cash flow is the same under FIFO, LIFO, average cost, and specific identification.
After-tax cash flow can differ, however.
ahhh thnx!