What are the advantages of using FIFO in inventory management?

What are the advantages of using FIFO in inventory management?

FIFO, or First In, First Out, helps ensure that older inventory is sold first, reducing spoilage and obsolescence.

Can you explain how FIFO affects financial reporting?

Certainly! FIFO can lead to higher profits during inflation since older, cheaper costs are matched against current revenues.

Are there any disadvantages to using FIFO?

Yes, one disadvantage is that it may not reflect the current market value of inventory, potentially affecting cash flow.

How does FIFO compare to LIFO?

FIFO contrasts with LIFO, or Last In, First Out, where the most recently acquired items are sold first, impacting profit and tax.

What industries benefit the most from FIFO?

Industries like food and pharmaceuticals benefit greatly from FIFO due to the perishable nature of their products.