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The term inventory refers to the array of goods that a company holds during its normal course of business. This includes:
- Raw materials: Supplies used to produce finished goods.
- Work-in-progress (WIP): Goods that are in the process of being manufactured but are not yet complete.
- Finished goods: Products that are ready for sale.
Inventory is classified as a current asset on a company's balance sheet and is one of the most important assets a company has because it represents a primary source of revenue generation and subsequent earnings for the company's shareholders1.
There are also different methods to value inventory, such as:
- First-in, first-out (FIFO): Assumes that the earliest goods purchased are the first to be sold.
- Last-in, first-out (LIFO): Assumes that the latest goods purchased are the first to be sold.
- Weighted average method: Values inventory based on the average cost of all materials bought during a period.
Learn more:✕This summary was generated using AI based on multiple online sources. To view the original source information, use the "Learn more" links.www.investopedia.com/terms/i/inventory.aspwww.merriam-webster.com/dictionary/inventorywww.dictionary.com/browse/inventoryen.wikipedia.org/wiki/Inventorywww.gettyimages.com/detail/news-photo/takes-inv…- People also ask
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