Analysis The Impact Of Accounting Inventory Method On Price Earning Ratio

Abstract

The objective of this study is identifying the factors which are influent the choice of inventory method and its effect to price earning ratio with the focus to Ricardian hypotheses. The study will examine regarding the choice of inventory method between average and FIFO method. This examination used six variables: inventory variability, inventory intensity, capital intensity, cost of good sold variability, firm size and accounting income variability. The objects of this study are all manufacturing companies listed in BEJ during 2002 - 2004. The t-test, logistic regression, and analysis of covariance used to test of hypotheses. The result of the logistic regression shows that production investment opportunity is influent to the inventory method choice. The t-test and analysis of covariance shows that firms price earning ratio between FIFO and average method are not significant although using control variable.