Which inventory method (FIFO or LIFO) would you use if you were the CEO of a for-profit company, in a time of rising inventory prices? Why?
Explain and persuade others that you selected the optimal answer.
Recall that LIFO typically provides lower profit margin and other performance metrics but the company uses less cash because its taxes are lower than under FIFO. (Its taxes are lower because its expenses, COGS, are higher which results in lower income and therefore lower taxes.) FIFO on the other hand provides higher profit margin and other performance metrics but the company uses more cash because it pays more in taxes as a result of having higher net income.
What other factors would you consider in making your decision between FIFO and LIFO, in a for-profit company during a time of rising inventory prices?