Advantages of LIFO

This video discusses three advantages of using LIFO as a firm's inventory cost flow assumption: (1) lower taxes/higher cash flow (in periods of rising prices, (2) better matching of costs with revenue (more recent/relevant costs are being matched with revenue instead of older, stale prices), and (3) less frequent writedowns (since you are moving the higher-priced inventory to cost of goods sold first, assuming it is a period of rising prices). The video provides an example to illustrate why these three factors can make using LIFO advantageous for a firm.—
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