Ending Inventory

What is 'Ending Inventory'

Ending inventory is the value of goods available for sale at the end of the accounting period. The ending inventory is recorded as the lower of the cost of the inventory or the market value of the inventory. Assuming no write-downs, the ending inventory can be found by starting with the beginning inventory, adding purchases and subtracting the cost of goods sold.

BREAKING DOWN 'Ending Inventory'

Normally the market value of inventory is higher than the cost, since the company expects to sell its goods at a profit. It is common, however, for a certain amount of inventory to go unsold or become outmoded and, thus, its expected market price may become lower than its initial cost. When this occurs, the company must write down the value of its inventory to more accurately reflect the value of the company's assets.

RELATED TERMS
  1. Average Inventory

    A calculation comparing the value or number of a particular good ...
  2. Perpetual Inventory

    A method of accounting for inventory that records the sale or ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors ...
  4. Carrying Cost Of Inventory

    This is the cost a business incurs over a certain period of time, ...
  5. Lower of Cost and Market Method

    A requirement of GAAP in the United States that inventory be ...
  6. Average Age Of Inventory

    The average number of days it takes for a firm to sell to consumers ...
Related Articles
  1. Investing

    Days Sales of Inventory

    Days Sales of Inventory, also called Days Inventory Outstanding, is a key financial measurement of a company's performance pertaining to inventory management. In simple terms, it tells how many ...
  2. Investing

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  3. Investing

    How to Calculate Average Inventory

    Average inventory is the median value of an inventory at a specific time period.
  4. Investing

    Explaining Carrying Cost of Inventory

    The carrying cost of inventory is the cost a business pays for holding goods in stock.
  5. Investing

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  6. Investing

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  7. Investing

    Understanding Periodic Vs. Perpetual Inventory

    An overview of the two primary inventory accounting systems.
  8. Investing

    Reading The Inventory Turnover

    Inventory turnover is a ratio that shows how quickly a company uses up its supply of goods over a given time frame. Inventory turnover may be calculated as the market value of sales divided by ...
  9. Investing

    How Does a Perpetual Inventory System Work?

    Perpetual inventory is a system that continually tracks inventory items for quantity and availability.
  10. Investing

    AR & Inventory Turnover Is Key For These Sectors

    Accounts receivable and inventory turnover are two important ratios in the current asset category. We will also discuss the key industries that benefit from a thorough understanding of these ...
RELATED FAQS
  1. Why should investors care about the Days Sales of Inventory (DSI)?

    Learn about days sales of inventory and what it measures; understand why an investor would want to know a company's days ... Read Answer >>
  2. How do you analyze inventory on the balance sheet?

    Learn how to analyze inventory using financial statements and footnotes by doing ratio analysis and performing qualitative ... Read Answer >>
  3. Why is it sometimes better to use an average inventory figure when calculating the ...

    For a couple of key reasons, average inventory can be a better and more accurate measure when calculating the inventory turnover ... Read Answer >>
  4. What is the formula for calculating inventory turnover?

    Learn about the inventory turnover ratio, how it is calculated and what this efficiency metric tells businesses about their ... Read Answer >>
  5. How do I calculate the inventory turnover ratio?

    The inventory turnover ratio is a key measure for evaluating how efficient management is at managing company inventory and ... Read Answer >>
  6. What are the generally accepted accounting principles for inventory reserves?

    As with most matters related to generally accepted accounting principles (GAAP), accountants assigned with the task of applying ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center