Inventory

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.