Real-world examples can make inventory models easier to understand.
However, while inventory is an asset on the balance sheet, too much inventory can become a practical liability. Inventory is a major asset for most companies. By keeping stock, both retailers and manufacturers can continue to sell or build items. As an accounting term, inventory refers to all stock in the various production stages and is a current asset. The verb “inventory” refers to the act of counting or listing items. As a business leader, you practice inventory management in order to ensure that you have enough stock on-hand and to identify when there’s a shortage. Inventory is the accounting of items, component parts and raw materials a company uses in production, or sells.
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