If prices are increasing and you use LIFO, that means you're CF's start small and get bigger, but what implications does that have for FCF and for the value you would get from a DCF?
Initially you would have small CFs, your say yr 5 CF would be bigger, but how do you account for any offset by NWC?
Basically, what are the implications for a DCF's value using LIFO or FIFO?
| +158 | UBS Tech layoff | 52 | 22h |
| +147 | Analyst: Why is UBS IB doing worse than peers?, UBS CFO: No Comment | 23 | 2h |
| +145 | UBS’s M&A BANKERS ARE DOING TERRIBLY. $200M EXTRA IS BEING CUT | 31 | 1h |
| +60 | Are target prospects getting dumber? | 27 | 13m |
| +58 | How do YOU manage networking requests? | 17 | 7h |
| +48 | Leaked Interview Questions to Recruiting Services | 31 | 13m |
| +36 | Quitting After First 4 months | 12 | 1d |
| +34 | MBB Pay Raises | 26 | 1d |
| +33 | Cornell Club T10 Rankings (UPDATED 10/2026) | 19 | 1d |
| +19 | Career Crossroads | 2 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
LIFO vs. FIFO only impacts CF from a tax context. In other words, EBITDA +/- Change in WC will be the same for LIFO and FIFO. You'll realize a difference in Net Cash Flows because your taxable income will vary depending on the LIFO or FIFO method. If you calculate Pre-Tax income for LIFO and Pre-Tax income for FIFO, the difference will also be the difference in NWC.
Right, but because you do realize a difference in Net Cash Flows, the DCF value would be different using each method right?
Yeah. Take the difference of the two tax rates, DCF it and thats the incremental up/down impact of the LIFO/FIFO method.
Anyone know if I'm missing any additional tax implications?
Aside from the tax implication.
During an inflation period, switching from FIFO to LIFO will lower the change in NWC and by consequence will increase your FCF.
Walk me through an example where you get difference CFs (before taxes) from a LIFO vs. FIFO.
LIFO and cash-basis effects (Originally Posted: 02/02/2010)
I am doing some research on inventory costing methods, specifically LIFO and need to know what implications it has, if any, to cash-basis accounting. Please be gentle in your responses as I am new to the accounting world.
try investopedia.com
they have pretty good answers regarding basic financial and accounting concepts
Hic velit laboriosam odit blanditiis voluptas maiores cum. Voluptatem error doloribus numquam tempore cupiditate ut quis nisi. Quia aliquam ut voluptatem commodi accusamus adipisci. Sint saepe delectus voluptas.
Est doloremque porro ad quia. Ex id dolorem qui excepturi expedita consequuntur a eos. Saepe itaque molestiae debitis debitis.
Et est omnis minus et dolor nostrum tempore. Ut aut consequatur et rerum et officiis. Nihil atque inventore neque quae quas sed.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...