Hey everybody total CF is higher under LIFO and lower under FIFO What do they exactly mean with CF? Total CF = Cash inflow - Cash outflow? Would be grateful, if anybody could explain this to me. thanks
CF = CFO + CFI + CFF CF is lower if you use FIFO because COGS is lower, NI is higher and taxes paid are higher under FIFO. Of course, this only holds true if prices have been rising over the period.
when prices are increasing, LIFO inventory cost of goods sold > FIFO higher LIFO cogs results in lower taxable income and lower cash outflow to taxes. hence CFO is higher under LIFO.
thank you very much!