Last In First Out (LIFO) is an inventory management method where the most recently added items are the first to be sold or used. This approach is commonly used in industries where products have a limited shelf life, such as food and pharmaceuticals. By selling the newest stock first, businesses can reduce waste and ensure that older inventory remains available for sale. In accounting, LIFO can also affect how a company reports its profits and taxes. When prices rise, using LIFO can lead to lower taxable income since the cost of goods sold reflects the higher prices of the latest inventory. This method contrasts with First In First Out (FIFO), where the oldest items are sold first.