Caterpillar Inc. (CAT), based in Peoria, Illinois, USA, is the largest maker of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines in the world. Excerpts from CATs consolidated financial statements are shown in Exhibits 1 and 2;

4. By what amount would CATs 2017 and 2016 net cash flow from operating activities decline if CAT used the FIFO method instead of the LIFO method?
5. What is the cumulative amount of income tax savings that CAT has generated through 2017 by using the LIFO method instead of the FIFO method?
6. What amount would be added to CATs retained earnings (profit employed in the business) at 31 December 2017 if CAT had used the FIFO method instead of the LIFO method?

Caterpillar Inc. Consolidated Results of Operation (US$ millions)

For the years ended 31 December	2017	2016	2015
Sales and revenues:
Sales of Machinery and Engines	42,676	35,773	44,147
Revenue of Financial Products	2,786	2,764	2,864
Total sales and revenues	45,462	38,537	47,011
Operating costs:
Cost of goods sold	31,049	28,309	33,546
Interest expense of Financial Products	646	596	587
Total operating costs	41,056	38,039	43,226
Operating profit	4,406	498	3,785
Interest expense excluding Financial Products	531	505	507
Other income (expense)	207	146	161
Consolidated profit before taxes	4,082	139	4,439
Provision for income taxes	3,339	192	916
Profit (loss) of consolidated companies	743	(53)	2,523
Equity in profit (loss) of unconsolidated affiliated companies	16	(6)
Profit attributable to noncontrolling interests	5	8	11
Profit (loss)	754	(67)	2,512

Exhibit 2.Caterpillar Inc. Consolidated Financial Position (US$ millions)

31 December	2017	2016	2015
Assets
Current assets:
Cash and short-term investments	8,261	7,168	6,460
Inventories	10,018	8,614	9,700
Total current assets	36,244	31,967	33,508
Total assets	76,962	74,704	78,342
Liabilities
Total current liabilities	26,931	26,132	26,242
Total liabilities	63,196	61,491	63,457
Stockholders equity
Common stock of $1.00 par value:
Authorized shares: 2,000,000,000
Issued shares (2017, 2016 and 2015 814,894,624) at paid-in amount	5,593	5,277	5,238
Treasury stock (2017 217,268,852 shares; 2016 228,408,600 shares and 2015 232,572,734 shares) at cost	(17,005)	(17,478)	(17,640)
Profit employed in the business	26,301	27,377	29,246
Accumulated other comprehensive income (loss)	(1,192)	(2,039)	(2,035)
Noncontrolling interests	69	76	76
Total stockholders equity	13,766	13,213	14,885
Total liabilities and stockholders equity	76,962	74,704	78,342

Exhibit 3.Caterpillar Inc. Selected Notes to Consolidated Financial Statements

Note 1. Operations and Summary of Significant Accounting Policies

D. Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the last-in, first-out (LIFO) method. The value of inventories on the LIFO basis represented about 65% of total inventories at December 31, 2017 and about 60% of total inventories at December 31, 2016 and 2015.

If the FIFO (first-in, first-out) method had been in use, inventories would have been $1,934 million, $2,139 million and $2,498 million higher than reported at December 31, 2017, 2016 and 2015, respectively