a company`s largest expense is incurred on COGS (cost of good sold). so the company has always an option to be aggressive or consercative on its financial statement.

A company can use LIFO, FIFO and Avg cost strategy to calculate its COGS. But any of this strategy doesn`t refelect the warehousing process of that company, its only for accouting process.

all these infornmation (COGS Procedure) can be seen in accounting note in Financial Statement of company.

Genrally COGS is calculated as :-

COGS = Begaining Inventory + Purchase - ending inventroy

so if company is useing FIFO (first in first out) strategy for COGS calculation than it can be possible that company is takeing aggressive accounting procedure to show its profit in Financial Statement.

on the other hand if LIFO ( Late in first out) is being used that may be the company is being conservative in showing Profit, which help the company to save taxes, more cash in hand & Equity share Dividend saving.

And average cost strategy talks about avg purchase cost of the company. from this COGS strategy values will be lying in between the FIFO & LIFO.

This is the one way of looking @ Co. Financial Statement, Only on the basis of COGS strategy we can`t assume that company is too agressive or Conservative in showing its profit in FS.

For Eg. if company is using FIFO and Straight Line method of depriciation, this could be sigh that company is internally using agressive accountiong procedure.

for more vol. of this series, i`ll talk publish very soon, suggestions and comments are most welcome