Fine edge manufactures lawn mowers. In 2020 it had $2 million worth of lawn mowers in inventory. In 2021 it sold $10 million worth of lawn mowers to consumers and had $1 million worth of lawn mowers in inventory. $9 million worth lawn mowers produced by fine edge add to GDP in 2021.
Inventory or stock refers to goods and materials held by a company for the ultimate purpose of resale, production or use. Inventory management is a discipline primarily concerned with specifying the shape and placement of stored goods.
Is inventory an asset?
Inventory is an asset. Because companies put their money in it and when they sell their inventory, it turns into revenue. Inventory that does not sell as quickly as expected can become a liability.
What is the purpose of the inventory?
The primary function of the inventory is to provide a continuous supply of materials to the farm. To effectively accomplish this function, your business must strive to find the sweet spot between having too much or too little without running out of inventory.
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