How does Dynamics 365 handle inventory valuation?

Dynamics 365 handles inventory valuation by utilizing various methods such as FIFO (First In, First Out), LIFO (Last In, First Out), and Weighted Average. This flexibility allows organizations to choose the most appropriate method based on their operational needs and financial reporting requirements.

FIFO assumes that the oldest inventory costs are used up first, which can be advantageous in environments where prices are expected to rise. LIFO, on the other hand, assumes that the most recently purchased items are sold first, which can provide tax benefits in certain circumstances. The Weighted Average method calculates the average cost of all inventory available for sale during the period, smoothing out price fluctuations.

Having multiple valuation methods enhances the accuracy and relevance of financial statements and helps businesses maintain better control over costs and margins. This capability to select among various methods is particularly valuable in dynamic environments with fluctuating costs, making it a key feature of Dynamics 365 for managing inventory effectively.