FIFO
This business acronym stands for ‘First In, First Out’ and works on the concept of ‘First Come, First Served.’ This method of stock control assures that the first stock of a product is used or sold before more recently produced or acquired goods.
This can work well for companies whose tax is dependant on how long they hold their assets. For instance, take a company that sells sofas using the FIFO method. If the company had identical sofas delivered, one on Monday, one on Wednesday, and then a customer wanted to buy one on Thursday, they would sell the one they had delivered first. This is because the longer they held it, the longer they pay tax on that item. Therefore, they would try to sell the sofa that they have had on their premises for the most amount of time.
However, this does not always work in favour of the consumer. For example, next time you buy a pint of milk from your local and you squint at how sour it is, the shopkeeper has probably taken Business for Dummies a bit too seriously.
