Why is inventory valuation used?

Multiple choice — select the best answer

AIt allows a company to provide a monetary value for items that they have in their inventory on their balance sheet.
BTo understand the average cost of doing business on a daily basis.
CTo evaluate inventory of a company prior to it being sold.
DTo show transactions related to the sale and purchase of bonds.

✓ Correct answer: A. It allows a company to provide a monetary value for items that they have in their inventory on their balance sheet. Inventory valuation allows a company to provide a monetary value for items that they have in their inventory. This information permits a company to properly evaluate expenses and revenues on their financial statements so that they can make sound business decisions.

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Why is inventory valuation used?

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