Holding Costs

Definition of 'Holding Costs'


The associated price of storing inventory or assets that remain unsold. Holding costs are a major component of supply chain management, since businesses must determine how much of a product to keep in stock. This represents an opportunity cost, as the presence of the goods means that they are not being sold while that money could be deployed elsewhere. In addition, holding costs include the costs of goods being damaged or spoiled over time and the general costs, such as space, labor and other direct expenses.

Investopedia explains 'Holding Costs'


If a business overestimates how much of a product to purchase and is unable to quickly sell it, then the company will have to store the product. With limited storage space, storing one product creates an opportunity cost because the business can not store as much of other products. Additionally, overpurchasing may also leave a company storing a product that consumers no longer want.



comments powered by Disqus
Hot Definitions
  1. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  2. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  3. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  4. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  5. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  6. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
Trading Center