Asset ValuationAccounting for Management Decision MakingIntroductionTo start a new business and stay in business profitably, many critical decisions must be made when establishing the foundations of a new business are formed. These decisions affect the business in the long term and often make or break an organization. Inventory control methods and capitalization policies are among those critical decisions that will affect the bottom line of any business. Our team has studied these policies and will present our recommendations regarding the inventory management method and capitalization policy for Mattress Store XYZ in the remainder of this document. .Inventory policyThe choice of valuation method for reporting and valuation is based on key questions related to the relevance and reliability of the accounting method for this element. According to finetuning.com (2005), “How you identify inventory items and determine which ones have been sold will depend on the nature of the products, the volume of the products, how they are tracked, and inventory turnover.” . Key factors to consider under the inventory policy are: location of storage facilities, temperature, security, inventory rotation, cost, training, periodic inventories and control.caycon .com (2005) wrote: “Valuing a startup is intrinsically different from valuing established companies. Due to the high level of risk and often low or no revenue, traditional quantitative valuation methods such as comparable (P/E) earnings per share or discounted free cash flow are of little use. Startup valuations are largely determined based on qualitative data. attributes." To select an inventory valuation method, the options are FIFO, LIFO, and Weighted Average. The valuation method for (FIFO) First In, First Out: Answers.com (2005) defines it as a "method common method of recording inventory value. This is suitable when there are many different lots of similar products. This method describes that the first item in will be the first item out of inventory. writes “the cost flow hypothesis assumes that the oldest inventory is sold first. The ending inventory balance is valued at the most recent purchase price. FIFO produces a more relevant balance sheet. reflects its current purchase price." An example of this would be: The ending inventory balance would be 30 units of the most recent purchases. 30 x 300 = 9,000 E/B = 9,000.