Obsolete Inventory

What does it Mean? Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down and can cause large losses for a company.

Also referred to as "dead inventory" or "excess inventory".
Investopedia Says... Large amounts of obsolete inventory are a warning sign for investors: they can be symptomatic of poor products, poor management forecasts of demand, and poor inventory management. Looking at the amount of obsolete inventory a company creates will give investors an idea of how well the product is selling and of how effective the company's inventory process is.

Terms Related Links

Carrying Cost Of Inventory
First In, First Out - FIFO
Industry
Inventory
Last In, First Out - LIFO
LIFO Liquidation
Obsolescence Risk
Planned Obsolescence
Write-Down

Terms Related Links
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.

Measuring Company Efficiency - We look at a retailer's inventory turnaround times, its receivables as well as its collection period.

Evaluating A Company's Management - Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!




add investopedia foot
www.investopedia.com