First In, First Out (FIFO) is an inventory management method where the oldest stock is sold or used first. This approach is commonly used in industries like food and pharmaceuticals, where products have expiration dates. By ensuring that older items are used before newer ones, FIFO helps reduce waste and maintain product quality. In accounting, FIFO is also a method for valuing inventory. When calculating profits, the cost of the oldest inventory is used first, which can affect tax liabilities and financial reporting. This method contrasts with Last In, First Out (LIFO), where the most recently acquired items are sold first.