Inventory

Inventory refers to the goods and materials that a company has on hand and available for sale or use in its operations. It can include raw materials, work-in-progress products, and finished goods that are held by a company for its own use or for sale to customers.

Inventory is an important asset for many businesses, particularly those that sell physical goods, as it represents the company's investment in the products it sells or uses to manufacture other products.

Inventory can be classified into different categories based on its stage of completion and intended use, such as:

  1. Raw materials inventory: These are materials and components that are used in the production of goods but have not yet been assembled into finished products.
  2. Work-in-progress inventory: This refers to goods that are in the process of being manufactured or assembled but are not yet completed.
  3. Finished goods inventory: These are goods that have been completed and are ready for sale or delivery to customers.

Inventory is reported on a company's balance sheet as a current asset, and its value is usually stated at the lower of cost or market value. Inventory management is an important aspect of a company's operations, as it affects its cash flow, profitability, and ability to meet customer demand. Overstocking inventory can tie up cash and increase holding costs, while understocking can lead to lost sales and dissatisfied customers.