Glossary · Reading the business
Inventory valuation
In short
The method used to assign a monetary value to a business's inventory. This directly impacts the balance sheet and the cost of goods sold, affecting the business's profitability and overall value.
What it means in a deal
Understand how the seller values inventory (e.g., FIFO, LIFO, weighted average). During due diligence, reconcile physical inventory counts with financial records. Ensure the inventory isn't obsolete or unsellable, as overvalued inventory inflates assets and profits, potentially leading you to overpay.
Related terms
Common questions about Inventory valuation
- When is an independent business valuation required for a partner buyout?
- Can an SBA 7(a) loan cover inventory purchases for my business?
- What valuation methods are acceptable for assessing goodwill in an SBA acquisition?
- What if the business valuation is insufficient to support the purchase price?
- What is the importance of a professional business valuation for an acquisition?
- Can an SBA 7(a) loan fund initial inventory for a new business?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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