The inventory valuation process plays an important role in determining the company’s financial position.
INVENTORY STOCK VALUATION
Inventory stock valuation is the method of calculating the theoretical values of the stock of a company. The process or method of calculating the current worth of a stock at a given time period.
Companies use inventory valuation as a method of accounting to determine the value of unsold inventory stock when preparing their financial statements. A company’s inventory stock is an asset, and in order to be listed on the balance sheet, it must have a monetary value. You can use this value to calculate your inventory turnover ratio, which will enable you to better plan your purchasing actions.
Inventory valuation involves many steps in addition to identifying the unsold items. To get a final value, you also need a rate that you can multiply by the amount. You might have paid various prices for these items over the course of the year, so you need to decide on a method to determine a standard rate.