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LOFO (Lowest In - First Out) is an inventory management method where the items purchased at the lowest price are sold or used first, helping businesses maximize profits by clearing out older stock more efficiently.
LOFO is a strategy that prioritizes selling or using products purchased at the lowest cost before higher-priced items. This method ensures businesses minimize expenses and optimize cash flow, especially when prices fluctuate. By applying LOFO, companies can reduce the risk of inventory losses due to price increases or perishable goods.
LOFO works by prioritizing the sale or use of inventory items with the lowest cost first, making it ideal for companies dealing with fluctuating prices or perishable goods. By adopting this strategy, you can minimize losses and maximize profit by efficiently managing older stock.
LOFO improves cash flow, reduces the risk of inventory obsolescence, and helps businesses keep their costs under control. For your business, this method ensures that you are always working with the most cost-effective inventory, enhancing profitability.
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LOFO helps businesses effectively manage inventory by ensuring that older, lower-cost items are used or sold first, which reduces the risk of holding high-cost stock. This strategy is particularly valuable when prices rise or inventory is perishable, as it optimizes cost efficiency and increases profitability.
For example, a business in the food industry might use LOFO to sell items purchased at a lower cost before more expensive stock, ensuring that goods are sold before they expire. This approach minimizes waste and maximizes profit margins, keeping both inventory and cash flow in a healthy position.
