Inventory

Inventory is an important asset of a company.  For manufacturers, inventory is sometimes the single largest current asset appearing on the balance sheet.  When items held in inventory become obsolete or otherwise not sellable, a potential loss can occur.  The inventory for a business will fluctuate based on manufacturing volumes and sales.

The most common calculation of inventory is:

Starting Inventory + Additions - Sales = Ending Inventory

Inventory is used in the calculation of the cost of good sold and therefore also appears on the income statement.