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What Is Inventory?

Inventory refers to the goods, products, raw materials, and work in process that a company holds for the purpose of sale.

What the item represents

Inventory is an item classified under current assets on the balance sheet, referring to goods, products, raw materials, and similar items that have not yet been sold or used as of the reporting date.

Points to watch when reading it

Inventory levels vary widely by industry, so rather than looking at the absolute figure alone, it can help to compare it against revenue (to gauge inventory turnover) and to check the trend over the current and prior periods.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

What does it mean when inventory increases?
It may indicate unsold goods or excess stock, but it can also reflect purchasing made in anticipation of future sales growth. It's useful to check whether inventory is growing disproportionately compared with revenue growth.
What kinds of inventory are there?
The breakdown differs by industry and production process — for example, merchandise for a retailer, or raw materials, work in process, and finished goods for a manufacturer.

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