Asset Valuation Accounting for Managerial Decision MakingIntroductionTo start a new business and stay in business profitably, many critical decisions must be made when forming the foundation of a new business. These decisions affect the company in the long term and often make or break an organization. Inventory control methods and capitalization policies are among these critical decisions that will affect any company's bottom line. Our team has studied these policies and will present our recommendation for the inventory and capitalization policy method for XYZ Mattress Store in the remainder of this document. Inventory PolicyThe selection of valuation method for reporting and evaluation is based on key issues relating to the relevance and reliability of the accounting method for that item. According to finetuning.com (2005) “how to identify items in inventory 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 as part of the inventory policy are: location of storage facilities, temperature, safety, inventory rotation, costs, training, periodic inventories and control.caycon.com (2005) wrote: “Evaluating a Startup is inherently different from valuation due to the high level of risk and often little or no revenue, traditional quantitative valuation methods such as comparable earnings (P/E) per share or discounted free cash flows are of little utility attributes." To select an inventory valuation method, the options are FIFO, LIFO, and Weighted Average. The First-in, first-out (FIFO) valuation method: Answers.com (2005) defines it as a "common method of recording the value of inventory. It is appropriate when there are many different lots of similar products." This method describes that the first item to arrive will be the first to leave the inventory. Retailinventories.com (2005) wrote "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 because the ending inventory balance reflects its current value." An example of this would be: The ending balance in inventory would be 30 units of the most recent purchases. 30 x 300=9,000 E/B = 9,000.