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Goods and materials held by a business for production or resale. Managing inventory is crucial for smooth operations.

Introduction: Inventory encompasses all the goods and materials a business holds for the purpose of resale, manufacturing, or repair. It represents a critical asset on a company's balance sheet and is essential for operations, directly impacting a business's cash flow and profitability. Managing inventory effectively is a delicate balance between meeting customer demand without incurring excessive holding costs or risk of obsolescence. Types of inventory include raw materials, work-in-progress (WIP), and finished goods. Businesses across sectors—from retail to manufacturing—rely on precise inventory control to optimize their supply chain and maintain competitive advantage.

Key Aspects of Inventory:

  • Valuation Methods: Common approaches include First-In, First-Out (FIFO); Last-In, First-Out (LIFO); and Weighted Average Cost, each with implications for cost of goods sold (COGS) and tax obligations.
  • Inventory Turnover: A ratio indicating how often inventory is sold and replaced over a period, providing insights into sales efficiency and product demand.

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