Reading the accounts
Inventory
Also called Stock
Goods a company is holding to sell, valued on the balance sheet at cost or market value, whichever is lower.
How it works
Inventory ties up cash and carries risk: it can become obsolete, go out of fashion, or need discounting to clear.
Inventory growing much faster than sales is a classic early warning of demand weakening before it shows up in revenue.
Related terms
- Working capitalThe money tied up in day-to-day operations: inventory and money owed to you, less money you owe.
- Cash conversion cycleHow many days pass between paying for inventory and collecting cash from the customer.
- Gross marginWhat proportion of revenue is left after the direct cost of producing what was sold.
- WritedownReducing the recorded value of an asset when it is no longer worth what the books say.
More in Reading the accounts
- Liabilities
- Interest coverage
- Net debt
- Intangible assets
- Net debt / EBITDA
- Income statement
- Net income
- Net margin
All 51 Reading the accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.