Inventory

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Dictionary Says

Definition of 'Inventory'

The raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners.
Investopedia Says

Investopedia explains 'Inventory'

Possessing a high amount of inventory for long periods of time is not usually good for a business because of inventory storage, obsolescence and spoilage costs. However, possessing too little inventory isn't good either, because the business runs the risk of losing out on potential sales and potential market share as well.

Inventory management forecasts and strategies, such as a just-in-time inventory system, can help minimize inventory costs because goods are created or received as inventory only when needed.

Related Definitions

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    Economic Order Quantity - EOQ

    An inventory-related equation that determines the optimum order quantity that a company should hold in its inventory given a set cost of production, demand rate and other variables. This ...
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  • Carrying Cost Of Inventory

    This is the cost a business incurs over a certain period of time, to hold and store its inventory. Businesses use this figure to help them determine how much profit can be made on ...
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  • First In, First Out - FIFO

    An asset-management and valuation method in which the assets produced or acquired first are sold, used or disposed of first. FIFO may be used by a individual or a corporation.
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    • Inventory Turnover

      A ratio showing how many times a company's inventory is sold and replaced over a period. the The days in the period can then be divided by the inventory turnover formula to calculate the ...
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    • Shrinkage

      The loss of inventory that can be attributed to factors including employee theft, shoplifting, administrative error, vendor fraud, damage in transit or in store and cashier errors that ...
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    • Physical Asset

      An item of economic, commercial or exchange value that has a tangible or material existence. For most businesses, physical assets usually refer to cash, equipment, inventory and ...
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    • Highest In, First Out - HIFO

      In accounting, an inventory distribution method in which the inventory with the highest cost of purchase is the first to be used or taken out of stock. This will impact the company's ...
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    • First In, Still Here - FISH

      An accounting buzzword that describe when companies still have inventory on hand that is not being sold due to inattention or obsolescence. While not an official type of accounting ...
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    • Periodic Inventory

      A method of inventory valuation for financial reporting purposes where a physical count of the inventory is performed at specific intervals. This accounting method for inventory ...
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    • Just In Time - JIT

      An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory ...
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