Ignoring the impact of income tax, how does the choice between FIFO and LIFO affect a company's cash flows in an inflationary environment? How does income tax impact your answer? Why?
What will be an ideal response?
If the impact of income tax is ignored, the cash flow from operating activities on the statement of cash flows is identical under all three methods. Regardless of the cost flow reporting method, the company pays the same amount of cash to purchase inventory and receives the same amount of cash when it sells inventory. However, income tax does have an impact on this decision. FIFO produces the highest gross margin; it also produces the highest net income and the highest income tax expense. In contrast, LIFO results in recognizing the lowest gross margin, lowest net income, and the lowest income tax expense. The use of LIFO results in a lower cash outflow for income taxes.
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Indicate whether the statement is true or false
Demand forecasts and market intelligence inputs are fed to sales and operations plans by the ______ department.
a. marketing b. human resources c. finance d. operations
Eccles Inccorporated Eccles Incorporated, a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 25%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. Refer to the data for Eccles Incorporated. What is the value of the firm according to MM with corporate taxes?
A. $480,938 B. $534,375 C. $593,750 D. $653,125 E. $718,438
Any irregularity on the face of an instrument that calls into question its validity will bar HDC status.
Answer the following statement true (T) or false (F)