inventory

1. A company's merchandise, raw materials, and finished and unfinished products which have not yet been sold. These are considered liquid assets, since they can be converted into cash quite easily. There are various means of valuing these assets, but to be conservative the lowest value is usually used in financial statements.

2. The securities bought by a broker or dealer in order to resell them. For the period that the broker or dealer holds the securities in inventory, he/she is bearing the risk related to the securities, which may change in price.

Beginning Inventory + Net Purchases - Cost of Goods Sold (COGS) = Ending Inventory

inventory Turnover

What Does Inventory Turnover Mean?

A ratio showing how many times a company's inventory is sold and replaced over a period. the

The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days".

Investopedia explains Inventory Turnover

Although the first calculation is more frequently used, COGS (cost of goods sold) may be substituted because sales are recorded at market value, while inventories are usually recorded at cost. Also, average inventory may be used instead of the ending inventory level to minimize seasonal factors.

This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.