Last In, First Out (LIFO)

Last In, First Out (LIFO) is an inventory valuation method where a company sells its most recently purchased items first. This means that the last items added to inventory are the first ones to be sold. Companies use LIFO to match their recent costs with sales, which can help reduce taxes when prices are rising. However, it can also lead to lower reported profits and lower asset values on the balance sheet.

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