The following information is from the 2009 annual report of American Greetings Corporation (all dollars in thousands).

The following information comes from the notes to the company’s financial statements.
Finished products, work in process, and raw material inventories are carried at the lowerof-
cost-or-market. The last-in, first-out (LIFO) cost method is used for approximately 75%
of the domestic inventories in 2009 and approximately 70% in 2008. The foreign subsidiaries principally use the first-in, first-out method. Display material and factory supplies are carried at average-cost.
Instructions

(a) Define each of the following: finished goods, work in process, and raw materials.

(b) What might be a possible explanation for why the company uses FIFO for its nondomestic inventories?

(c) Calculate the company’s inventory turnover ratio and days in inventory for 2008 and 2009.
(2007 inventory was $182,618.) Discuss the implications of any change in the ratios.

(d) What percentage of total inventory does the 2009 LIFO reserve represent? If the company used FIFO in 2009, what would be the value of its inventory? Do you consider this difference a “material” amount from the perspective of an analyst? Which value accurately represents the value of the company’s inventory?

(e) Calculate the company’s 2009 current ratio with the numbers as reported, then recalculate after adjusting for the LIFO reserve.
FINANCIAL ANALYSIS ON THE WEB

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Feb. 28, 2009 Feb. 29, 2008 Inventories Finished goods $232,893 $244,379 Work in process 7,068 10,516 Raw materials and supplies 49,937 43,861 289,898 298,756 Less: LIFO reserve 86,025 82,085 Total (as reported) $203,873 $216,671 Cost of goods sold $809,956 $780,771 Current assets (as reported) $561,395 $669,340 Current liabilities $343,405 $432,321