The First In, First Out (FIFO) periodic inventory method is a method of accounting for inventory that assumes the oldest items in inventory are sold or used first. This method allows businesses to better reflect the actual flow of goods, which can be useful in situations where prices vary over time or when inventory values have significantly increased or decreased. With FIFO, businesses use the cost of the oldest inventory items on hand to determine the cost of goods sold, while they also use the latest inventory prices to calculate their ending inventory balance. The FIFO periodic inventory method helps businesses keep a closer eye on costs, while also providing an accurate picture of their financial position.