Finn is interested in taking over a small business, but he wants to pay a fair price for it, so he consults their income stateme
nts. How can he determine the company's overall profitability in each quarter of the previous year? a. Calculate total revenue minus taxes paid.
b. Calculate operating revenue minus operating expenses.
c. Calculate total revenue minus operating expenses.
d. Calculate total revenue minus total expenses
Profit is Calculated as Total revenue minus Total expenses. Therefore, consider all Incomes generated by the Business whether Primary or Secondary. Also consider all Expenses incurred by the business including Non - Operating expenses.
LIFO : results in a higher quality of earnings ratio.
FIFO : in higher phantom profits.
FIFO : results in higher net income.
LIFO : results in lower taxes.
FIFO : results in lower net cash provided by operating activities.
Explanation:
FIFO states that first goods brought are the first to be sold and the inventory consists of the most recent purchases and LIFO assumes that the last goods are purchased and first sold.
Thus LIFO results in a higher earning ratio and in a lowering of the taxes and FIFO at higher net incomes and lowers the net cash provided for the operating activities.
