LIFO FIFO Switch
2015 - 2x revenue, 8x ebitda. 2016 - 2x revenue, 10x ebitda. Fifo to lifo switch, what happens?
Don't completely grasp the concept of LIFO/FIFO in this situation. Is the answer just that the EBITDA numbers would switch, so 2015 has 10x EBITDA and 2016 8x?
Your question is worded confusingly. When is the FIFO/LIFO switch completed? Moving forward? Between 2015 and 2016?
Moving to LIFO in an inflationary environment is used as a tax strategy for firms, as it lowers near term EBITDA and taxes paid to the government. This would make a company more valuable (compared to an identical company using FIFO in an inflationary environment). Everything else equal, this would drive up the EBITDA multiple: LIFO increases firm value in this instance.
I am not sure if this helps, or if I'm missing what the question is getting at, but hopefully that is somewhat useful.
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