What is the effect of inventory valuation on financial statements?

What is the effect of inventory valuation on financial statements?

Step 1: Understand that inventory is the goods a company has for sale.
Step 2: Know that inventory valuation is how a company determines the value of its inventory.
Step 3: Realize that the value of inventory affects the balance sheet, which shows what the company owns.
Step 4: Recognize that higher inventory value increases current assets on the balance sheet.
Step 5: Understand that inventory valuation also affects the income statement, which shows the company's profits.
Step 6: Learn that the cost of goods sold (COGS) is calculated based on inventory valuation.
Step 7: Know that if COGS is higher, net income will be lower, and vice versa.
Step 8: Conclude that inventory valuation impacts both the balance sheet and the income statement.

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