The choice of LIFO or FIFO (which are both allowed under U.S. GAAP; however, LIFO is not allowed under IFRS) affects cost of goods sold (in periods of rising prices, FIFO results in a higher net income than LIFO, all else equal). Thus, if you were to calculate DPO using COGS (which many people do), the inventory cost flow assumption would affect DPO through its effect on COGS.
Great video, 95% understood.. But not sure how choice between LIFO and FIFO would affect DPO. Pls help.
The choice of LIFO or FIFO (which are both allowed under U.S. GAAP; however, LIFO is not allowed under IFRS) affects cost of goods sold (in periods of rising prices, FIFO results in a higher net income than LIFO, all else equal). Thus, if you were to calculate DPO using COGS (which many people do), the inventory cost flow assumption would affect DPO through its effect on COGS.