Concept explainers
ETHICS CHALLENGE
Golf Challenge Corp. is a retail sports store carrying golf apparel and equipment. The store is at the end of its second year of operation and is struggling. A major problem is that its cost of inventory has continually increased in the past two years. In the first year of operations, the store assigned inventory costs using LIFO. A loan agreement the store has with its bank, its prime source of financing, requires the store to maintain a certain profit margin and
Required
- 1. How does Golf Challenge’s use of FIFO improve its net profit margin and current ratio?
- 2. Is the action by Golf Challenge’s owner ethical? Explain.
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Principles of Financial Accounting.
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