Inventory Valuation is the process of assigning a dollar value to a business’s inventory. In other words, it’s the practice of determining what a company’s merchandise costs them in terms of acquisition and production so that they can properly deduct the cost from their taxes. It is important for businesses to understand the full value of their inventory as it allows them to accurately calculate their profits and losses. Furthermore, inventory valuation helps companies better manage their stock levels, make wiser purchasing decisions, and plan budgeting strategies appropriately. With careful inventory valuation, businesses can maximize profits while ensuring they have enough stock to meet customer demand.