Question

Youngstown Corporation is considering changing its inventory method from FIFO to LIFO. Assume that inventory prices have been increasing. All else equal, what impact would you expect the change to have on the following ratios: net profit margin, fixed asset turnover ratio, current ratio, and quick ratio?

Answer 1

Youngstown Corporation is considering changing its inventory method from FIFO to LIFO. Assume that inventory prices have been increasing. All else equal, it impact would we expect the change to have on the following ratios net profit margin fixed asset turnover ratio, current ratio, and quick ratio is  net profit margin.

The net profit margin or simply net margin, measures how much net income or profit is generated as a percentage of revenue. It is the ratio of net profits to revenues for a company or business segment. Net profit margin is typically expressed as a percentage but can also be represented in decimal form.

Traditionally known as a center of steel production, Youngstown has been forced to adapt after the steel industry in the United States fell into decline in the 1970s, leaving communities throughout the region without any major industry. There has been a decline in population of more than 60% since 1959.

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