Investing term

What is Inventory?

Goods the company has made or bought but not yet sold.

Inventory is the goods a company has made or bought but not yet sold, recorded as a current asset on the balance sheet. Watching it relative to sales is revealing: inventory piling up faster than revenue can mean products aren't selling and write-downs may loom, while lean, fast-moving inventory signals a healthy, well-run operation.

For example

A retailer whose inventory balloons while sales stall is a warning sign — unsold stock may soon have to be marked down, denting profits.

Inventory is taught hands-on in Stage 14 — Reading Financial Statements.

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Related terms

Accounts receivable (A/R)Money customers owe the company for goods or services already delivered but not yet paid.AccrualsAccounting entries that record revenue or expense before cash actually moves.Annual reportThe yearly disclosure that includes audited financials, MD&A, and footnotes — the primary source for serious investors.Balance sheetThe 'photo' statement — what the company owns, what it owes, and what's left for owners, on a single date.
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