Inventory

Inventory (Definition)

Inventory refers to the goods available for sale and raw materials used to produce goods available for sale.

Key aspects of inventory include:

1. Represents a significant asset for many businesses, especially in retail and manufacturing
2. Can include raw materials, work-in-progress, and finished goods
3. Valued using methods such as FIFO, LIFO, or weighted average cost
4. Proper management is crucial for cash flow and operational efficiency
5. Over-stocking can tie up capital, while under-stocking can lead to lost sales
6. Subject to periodic physical counts and valuation for accurate financial reporting
7. Understanding inventory turnover is important for assessing business performance

Effective inventory management is essential for optimizing operations, controlling costs, and maintaining customer satisfaction.