Multiple choice

Which of the following will tend to undermine stock in hand in an inflationary economy?

  1. Average price

  2. LIFO

  3. FIFO

  4. None of these

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

LIFO leaves older, lower-cost items in the inventory balance during inflation, which causes the book value of the stock to be understated compared to current market prices.