Use Caterpillars financial statements to answer the following questions.

CONSOLIDATED BALANCE SHEETS In millions
As of As of As of Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 ASSETS
Cash & cash equivalents $ 9,352	$ 8,284	$ 7,857
Receivables, net 16,780 17,904 31,899
Inventories 11,402	11,266	11,529
Prepaid expenses and other current assets 1,930 1,739 1,765
Total current assets 39,464	39,193	53,050
Property, plant and equipment, net 12,401 12,904 13,574
Intangible assets 7,702	7,761	8,114
Other long-term assets 18,757 18,595 3,771
Total assets $ 78,324	$ 78,453	$ 78,509
LIABILITIES & STOCKHOLDERS EQUITY
Short-term borrowings $ 2,015	$ 5,166	$ 5,723
Accounts payable 6,128 5,957 7,051
Accrued expenses 3,642	3,750	3,573
Accrued wages, salaries and employee benefits 1,096 1,629 2,384
Unearned revenue 1,108	1,187	1,243
Dividends payable 562 567 495
Long-term debt due within one year 9,149	6,210	5,830
Other current liabilities 2,017 2,155 1,919
Total current liabilities 25,717	26,621	28,218
Long-term debt due after one year 25,999 26,281 25,000
Liability for postemployment benefits 6,872	6,599	7,455
Other long-term liabilities 4,358 4,323 3,756
Total liabilities 62,946	63,824	64,429
Contributed capital (18,901) (18,241) (14,704)
Retained earnings 35,167	34,437	30,427
Accumulated other comprehensive loss (888) (1,567) (1,643)
Total stockholders equity 15,378 14,629 14,080
Total liabilities & stockholders equity $ 78,324 $ 78,453 $ 78,509

CONSOLIDATED INCOME STATEMENTS In millions, except per share amounts
Year ended Year ended Year ended Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
	Net sales $ 41,748	$ 53,800	$ 54,722
Cost of goods sold 29,082 36,630 36,997
	Gross margin 12,666	17,170	17,725
Selling, general and administrative expense 4,642 5,162 5,478
	Research and development expense 1,415	1,693	1,850
Goodwill impairment charge 589 754 --
	Other operating expenses 1,467	1,271	2,104
Income from operations 4,553 8,290 8,293
	Interest expense 514	421	404
Other expense/(income), net 44 57 67
	Income before income taxes 3,995	7,812	7,822
Income tax expense 1,006 1,746 1,675
	Net income $ 2,989	$ 6,066	$ 6,147

Notes to Consolidated Financial Statements (partial)

NATURE OF OPERATIONS

Our products are sold primarily under the brands Caterpillar, CAT, design versions of CAT and Caterpillar, "EMD," FG Wilson, MaK, MWM, Perkins, Progress Rail, SEM and Solar Turbines. Our machines are distributed principally through a worldwide organization of dealers (dealer network), 47 located in the United States and 121 located outside the United States, serving 193 countries.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is principally determined using the last-in, first-out (LIFO) method. If the FIFO (first-in, first-out) method had been in use, inventories would have been $2,132 million, $2,086 million, and $2,009 million higher than reported at December 31, 2020, 2019, and 2018, respectively.

Questions:

What inventory flow assumption did Caterpillar use to value most of its inventory? Why do you think they chose that assumption?

Find or compute Inventory and COGS (a) in Caterpillars existing financial statements and (b) if Caterpillar had instead used FIFO to value its inventory.

	Current Financial Statements (i.e., primarily LIFO)	If company had instead used only FIFO
Inventory at 12/31/20
Inventory at 12/31/19
COGS for year ended 12/31/20

What were Caterpillars approximate tax savings in the most recent fiscal year from using LIFO rather than FIFO? Assume a tax rate of 30%.

What were Caterpillars approximate cumulative tax savings from using LIFO rather than FIFO? Assume a tax rate of 30%.

Calculate Caterpillars Days Inventory for the two most recent fiscal years. Do these ratios suggest Caterpillar managed its inventory better in the year ended 12/31/20 or 12/31/19?

	Year ended 12/31/20	Year ended 12/31/19	Better in 2020 or 2019?
Days Inventory