Inventory

Inventory is the stock of goods, raw materials, and finished products that a business holds. For a retailer, inventory is the products on shelves waiting to be sold. For a manufacturer, it includes raw materials, work-in-progress, and finished goods.

Managing inventory is a balancing act. Too much inventory ties up cash and increases storage costs. Too little means you risk running out of stock and losing sales. Techniques like Just-In-Time (JIT) aim to minimize inventory while meeting demand.

Inventory is recorded as a current asset on the balance sheet. When it is sold, its cost moves to the income statement as Cost of Goods Sold (COGS).