Why is the method of valuing inventory important?

(a) Inventory valuation is based on the actual flow of goods.

(b) Inventories always account for more than 50% of total assets and therefore have a considerable impact on a company’s financial position.

(c) Companies desire to use the inventory valuation method that minimizes the cost of goods sold expense.

(d) The inventory valuation method chosen determines the value of inventory on the balance sheet and the cost of goods sold expense on the income statement, two items that have considerable impact on a company’s financial position.