Inventory

What is it? Products ready for sale and the materials needed to make them. Manufacturers and retailers need enough inventory in stock to satisfy their customers. Service companies often do not need any inventory at all to do business. Inventories can be valued in different ways, such as whether the materials sold were the first or the last to go into inventory. The value is sometimes overstated on balance sheets. Retailers, for example, often mark down their goods to clear them. A bankrupt company that liquidates its inventory may get only a fraction of the book value. The level of inventory can tell investors quite a bit about a company?s prospects. Low inventory levels may mean a company will have trouble filling orders. High inventory levels are worrisome because it ties up capital that the company could use elsewhere. Inventories that are rising faster than revenues can be an indicator that the company is headed for trouble.

Added By: Savannah

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