First-In, First-Out (FIFO) is an inventory management method where the oldest stock is sold or used first. This approach helps businesses maintain fresh products and reduces the risk of spoilage, especially in industries like food and pharmaceuticals. By following FIFO, companies can ensure that their inventory turnover is efficient and that customers receive the best quality items. In accounting, FIFO is also used to value inventory and calculate cost of goods sold. Under this method, the costs associated with the oldest inventory are recorded first when items are sold. This can impact financial statements and tax liabilities, making FIFO a crucial concept for businesses managing their assets effectively.