Inventory decisions

Abstract

Inventories are the physical stocks held by the firm, and may include raw materials, components, spare parts, work in progress and finished goods. Inventories appear on the company balance sheet as a current asset, and may form a substantial proportion of the value of the firm. From a managerial perspective, large stock-holdings may prove to be more of a liability than an asset, with the high costs of carrying stock being a primary reason for many business failures.