Final answer:
False, the inventory cost flow method does have an impact on financial statement analysis. It influences key financial statement components and financial ratios, affecting how the company's performance is assessed and compared.
Step-by-step explanation:
False, the inventory cost flow method used by a company does affect financial statement analysis. When a company selects an inventory costing method such as First-In, First-Out (FIFO), Last-In, First-Out (LIFO), or Weighted Average Cost, it directly influences the reported amount of inventory on the balance sheet, cost of goods sold on the income statement, and therefore, the net income. These variations can have significant impacts on profitability ratios, liquidity ratios, and other financial analysis metrics that investors and creditors rely upon for decision-making.
For instance, in periods of rising prices, FIFO will typically result in lower cost of goods sold and thus higher net income compared to LIFO, which would report higher cost of goods sold and lower net income. This in turn affects the company's tax liability, cash flow, and financial ratios like the gross margin and inventory turnover. Consequently, the inventory costing method has a substantial effect on the comparison of financial performance across different financial periods or with other companies.