What does the acronym FILO stand for in a financial context?

In a financial context, the acronym FILO stands for "First-In/Last-Out." This term is commonly used to describe a specific inventory management or accounting method where the first items added to inventory are the last ones to be sold or removed. This system is particularly relevant in industries where inventory can become obsolete or where the price of goods fluctuates significantly over time.

By using the FILO method, businesses can ensure that they are selling the most recently manufactured or acquired items first, which can help in managing costs and minimizing losses from unsold inventory. FILO is often contrasted with the FIFO method (First-In/First-Out), which emphasizes selling the oldest inventory first.

Understanding FILO is essential for professionals in finance and inventory management, as it plays a critical role in how companies assess their stock values, manage cash flow, and report on their financial statements.