What is the impact of replacing the inventory cost flow assumption method from the FIFO to Lifo on the current Ratio ? supply example

Dear Mr. Abdullah, Thanks for this good question.

Before explaining the effect on Current Ratio i would like to mention the effect of shifting from FIFO to LIFO. simply in FIFO your balance sheet depicts inventory on Current prices or replacement cost and COGS on historical prices , the old prices and vice versa for LIFO. 

Now the important thing here how is the price trend prevails. In case of prices increasing ( Inflationary situation) it is obvious the CLOSING INVENTORY on Balance sheet will he on high value and the COGS will on low historical values hence profit will increase and Current ratios will be low ( due to high inventory level) at FIFO.

So if you shift from FIFO To LIFO In inflationary situation the current ratios in LIFO will be less comparing to FIFO and vice versa.

similarly in case of Deflation ( decreasing price tends) the above situation will have alter impact.