The inventory turnover ratio is calculated as cost of goods sold divided by average inventory. Therefore, the inventory method that gives the lowest value of inventory will create a higher inventory turnover. Even under specific identification, the inventory turnover will not be higher than LIFO. This is because LIFO assumes that all of the items in inventory are the oldest whereas specific identification will have some old and some new units in ending inventory.
The inventory turnover ratio is calculated as cost of goods sold divided by average inventory. Therefore, the inventory method that gives the lowest value of inventory will create the highest inventory turnover ratio. Weighted average will give an ending inventory value that is between that of LIFO and FIFO, so it will not be either the lowest or the highest inventory balance.
The inventory turnover ratio is calculated as cost of goods sold divided by average inventory. Therefore, the inventory method that gives the lowest value of inventory will create a higher inventory turnover ratio. In an inflationary economy, FIFO provides the highest value for the inventory since it assumes that the oldest (cheapest) units are sold first and the newest (most expensive) units are in inventory at the end of the period.
The inventory turnover ratio is calculated as cost of goods sold divided by average inventory. Therefore, the inventory method that gives the lowest value of inventory will create the highest inventory turnover ratio. In an inflationary economy, LIFO provides the lowest value for the inventory since it assumes that the newest (most expensive) units are sold first and the oldest (cheapest) units are in inventory at the end of the period.
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