Work In Progress - WIP

AAA

DEFINITION of 'Work In Progress - WIP'

Material that has entered the production process but is not yet a finished product. Work in progress (WIP) therefore refers to all materials and partly finished products that are at various stages of the production process. WIP excludes inventory of raw materials at the start of the production cycle and finished products inventory at the end of the production cycle.

Also referred to as "work in process."

 

INVESTOPEDIA EXPLAINS 'Work In Progress - WIP'

For accounting purposes, work in progress is considered as a current asset on the balance sheet. WIP is generally valued higher than raw materials, but significantly lower than finished products.

Most companies strive to keep the actual amount of work in progress as low as possible, so as to reduce the amount of capital tied up in the production or manufacturing process. Another reason to keep WIP low is to reduce the risk of obsolescence, especially in fast-moving sectors such as technology and consumer electronics.

VIDEO

Loading the player...
RELATED TERMS
  1. Working Capital

    This ratio indicates whether a company has enough short term ...
  2. Obsolescence Risk

    The risk that a process, product or technology used or produced ...
  3. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  4. Inventory

    The raw materials, work-in-process goods and completely finished ...
  5. Raw Materials

    A material or substance used in the primary production or manufacturing ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
RELATED FAQS
  1. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  2. What is the difference between work in progress (WIP) and raw materials in accounting?

    Raw materials and works in progress (WIP) are distinct categories in financial accounting for business inventory. Each applies ... Read Full Answer >>
  3. What measures can be used to evaluate the capital adequacy of a bank?

    The most commonly used assessment of a bank's capital adequacy is the capital adequacy ratio. However, many analysts and ... Read Full Answer >>
  4. What are some examples of a deferred tax liability?

    In the United States, laws allow companies to maintain two separate sets of books for financial and tax purposes. Because ... Read Full Answer >>
  5. What dividend yield is typical for companies in the industrial sector?

    The average dividend yield of the industrial goods sector is approximately 1.71%. The industrial goods sector is a group ... Read Full Answer >>
  6. How can the first-in, first-out (FIFO) method be used to minimize taxes?

    The first-in, first-out (FIFO) inventory cost method can be used to minimize taxes during periods of rising prices, since ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Work In Progress (WIP)

    Work in progress, also know as WIP, is an asset on the company balance sheet. WIP is the accumulated costs of unfinished goods that are currently in the manufacturing process.
  2. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  3. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  4. Investing Basics

    The Working Capital Position

    Learn how to correctly analyze a company's liquidity and beat the average investor.
  5. Fundamental Analysis

    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.
  6. Investing Basics

    Understanding The Cash Conversion Cycle

    Find out how a simple calculation can help you uncover the most efficient companies.
  7. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  8. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  9. Economics

    What is a Share Premium Account?

    The share premium account is an equity account found on a company’s balance sheet.
  10. Investing

    What is Comprehensive Income?

    Comprehensive income is a part of the owners’ equity section of the balance sheet.

You May Also Like

Hot Definitions
  1. Fracking

    A slang term for hydraulic fracturing. Fracking refers to the procedure of creating fractures in rocks and rock formations ...
  2. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  3. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  4. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  5. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  6. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
Trading Center