Inventory
Definition: What is Inventory?
Inventory includes all of the raw materials, work-in-process goods and completely finished goods listed as part of assets of a business, either ready or to be ready for sale. It is one of the most important assets for most businesses. It is the turnover of inventory that represents one of the primary sources to generate revenue that is then considered as the company’s earnings.
Proper inventory management helps define a company’s effectiveness and efficiencies. Keeping too much inventory for too long is usually not a good proposition because of inventory storage costs, as well as risking that this inventory will become either obsolete, or spoiled, or both. Too little inventory, on the other hand, creates the risk that the company might lose potential sales as well as its market share. Inventory management is based on proper forecasts that include strategies, such as a just-in-time inventory system, to help minimize inventory costs.