NO.PZ2024011002000145
问题如下：
An analyst is analyzing two companies in the same industry and believes that they have similar strategies regarding the use of property, plant, and equipment (PP&E). He also thinks that the PP&E assets of the two companies are roughly of the same age and have the same expected useful lives remaining. Company A uses the LIFO method of inventory valuation, and Company B uses the FIFO method. The following additional information is available from the companies’ financial statements ($ millions):
In the analyst’s
opinion, which of the following conclusions is most appropriate? Compared with Company
A, Company B:
选项：
A.is more liquid. B.has a higher quality of earnings. C.uses more aggressive accounting estimates related to PP&E.解释：
The analyst believes the two companies’ PP&E are of the same age; however, the useful life remaining for Company B’s assets is 15 years compared with 10 for Company A, implying B is using a longer useful life or more aggressive accounting policies. The more aggressive PP&E estimates combined with the use of FIFO indicate that Company B has a lower quality of earnings, not higher. The adjusted current ratio for Company A (adjusted to include the LIFO reserve to convert the balance sheet to FIFO for comparison) is higher than the current ratio for B, indicating that A is more liquid.
The more aggressive PP&E estimates combined with the use of FIFO indicate that Company B has a lower quality of earnings, not higher.
为什么 use of FIFO indicate that Company B has a lower quality of earning?
