Inventory Valuation is the process of determining the worth of a company's inventory at a specific point in time. This valuation is crucial for financial reporting, as it affects the balance sheet and income statement. Businesses use various methods, such as First-In, First-Out (FIFO) or Last-In, First-Out (LIFO), to calculate the value of their inventory. Accurate inventory valuation helps companies manage their resources effectively and make informed decisions about purchasing and pricing. It also plays a significant role in tax calculations and can impact a company's profitability. Understanding inventory valuation is essential for maintaining financial health.