Inventory Analysis Excel Template

Description
Inventory is an asset that is intended to be sold in the ordinary course of business. Inventory may not be immediately ready for sale. Inventory items can fall into one of the following three categories:
Held for sale in the ordinary course of business; or
That is in the process of being produced for sale; or
The materials or supplies intended for consumption in the production process.
This asset classification includes items purchased and held for resale. In the case of services, inventory can be the costs of a service for which related revenue has not yet been recognized
In accounting, inventory is typically broken down into three categories, which are as follows:
Raw materials. Includes materials intended to be consumed in the production of finished goods.
Work-in-process. Includes items that are in the midst of the production process, and which are not yet in a state ready for sale to customers.
Finished goods. Includes goods ready for sale to customers. May be termed merchandise in a retail environment where items are bought from suppliers in a state ready for sale.
Inventory is typically classified as a short-term asset, since it is usually liquidated within one year.
A business can save a great deal of cash by managing its inventory as tightly as possible. When less inventory must be kept on-site, a firm’s working capital requirements are correspondingly reduced, thereby freeing up cash for other purposes. There are many ways to reduce inventory. For example, a business could arrange to have its suppliers ship goods directly to its customers (known as drop shipping), so that it eliminates the need for finished goods inventory entirely. Another possibility is to use suppliers located close to the company’s production facility, in order to take advantage of smaller and more frequent deliveries that reduce the amount of raw materials on hand. A third possibility is to position work stations closer together, so that parts processed on one machine can be handed off to the next work station, rather than letting them pile up in between.