The Impact of Inventory Costing Methods on Financial Ratios: A Comparative Case Study of FIFO and Weighted Average Methods

Author(s)	Dr. Mehmet Anıl Sayiner
Country	Turkey
Abstract	In this study, it is aimed to analyse the effect of inventory cost valuation methods on financial statements. Within the scope of the study, two different scenarios were created according to two situations in which prices increase or decrease in intra-period trade goods purchases. In this context, FIFO and Weighted Average Cost methods were selected from inventory cost valuation methods. In order to analyse the effects of these two different methods on the financial statements, Current Ratio, Inventory Turnover Ratio and Days Inventory Outstanding, Gross Profit Margin and Debt Ratio were selected, and analyses were carried out. As a result of the study, it has been determined that the choice of inventory cost valuation method has the potential to have a high impact on the financial performance indicators of an enterprise at a level that will affect the credibility of the enterprise, therefore, enterprises should choose an inventory cost valuation method by considering their performance and budget targets
Keywords	FIFO, Weighted average inventory, Financial ratios
Field	Business Administration
Published In	Volume 7, Issue 3, May-June 2025
Published On	2025-06-13
DOI	https://doi.org/10.36948/ijfmr.2025.v07i03.47765
Short DOI	https://doi.org/g9qp9p

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