Under the last-in, first-out (LIFO) method, the recently purchased raw materials are sold first. In an inflationary environment, LIFO COGS will be higher than FIFO COGS and earnings will be lower. Lower earnings result in lower income taxes, which increase cash flow. Inventory turnover (COGS / Average inventory) is higher under LIFO compared to FIFO. Under LIFO, COGS is valued higher costs (higher numerator), while inventory is valued at older, lower costs (lower denominator).