1

inventory

play
noun in·ven·to·ry \ˈin-vən-ˌtȯr-ē\
Updated on: 26 Jul 2017

Definition of inventory

plural

inventories

  1. 1a :  an itemized list of current assets: such as (1) :  a catalog of the property of an individual or estate (2) :  a list of goods on handb :  a survey of natural resourcesc :  a list of traits, preferences, attitudes, interests, or abilities used to evaluate personal characteristics or skills

  2. 2 :  survey, summary

  3. 3 :  the quantity of goods or materials on hand :  stock

  4. 4 :  the act or process of taking an inventory

inventorial

play \ˌin-vən-ˈtȯr-ē-əl\ adjective

inventorially

play \ˌin-vən-ˈtȯr-ē-ə-lē\ adverb

Examples of inventory in a Sentence

  1. We made an inventory of the library's collection.

  2. The dealer keeps a large inventory of used cars and trucks.

  3. Inventories at both stores were low.

  4. How can a small business afford to keep so much inventory?

  5. We'll be doing inventory on the collection soon.

Recent Examples of inventory from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'inventory.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of inventory

Middle English inventarie, inventorie, from Anglo-French inventaire, inventorie, from Latin inventarium, from inventum thing found, topic, neuter of inventus


2

inventory

verb in·ven·to·ry

Definition of inventory

inventoried

;

inventorying

  1. transitive verb
  2. :  to make an inventory of :  catalog

Examples of inventory in a Sentence

  1. We'll be inventorying the collection soon.

  2. would you inventory the supplies in the back room?

First Known Use of inventory

1602


Financial Definition of INVENTORY

inventory

What It Is

Inventory is the collection of unsold products waiting to be sold. Inventory is listed as a current asset on a company's balance sheet.

How It Works

Inventory is commonly thought of as the finished goods a company accumulates before selling them to end users. But inventory can also describe the raw materials used to produce the finished goods, goods as they go through the production process (referred to as "work-in-progress" or WIP), or goods that are "in transit."

There are generally five reasons companies maintain inventories:

To meet an anticipated increase in demand;
To protect against unanticipated increases in demand;
To take advantage of price breaks for ordering raw materials in bulk;
To prevent the idling of a whole factory if one part of the process breaks down; and,
To keep a steady stream of material flowing to retailers rather than making a single shipment of goods to retailers.

Inventory can also be used as collateral to obtain financing in some cases.

The basic requirement for counting an item in inventory is economic control rather than physical possession. Therefore, when a company purchases inventory, the item is included in the purchaser's inventory even if the purchaser does not have physical possession of those items.

Inventory is usually classified in its own category as an asset on the balance sheet, following receivables. It is important to note that the balance sheet's inventory account should also reflect costs directly or indirectly incurred in making an item ready for sale, including the purchase price of the item as well as the freight, receiving, unpacking, inspecting, storage, maintenance, insurance, taxes, and other costs associated with it.

Why It Matters

Inventory is a key component of calculating cost of goods sold (COGS) and is a key driver of profit, total assets, and tax liability. Many financial ratios, such as inventory turnover, incorporate inventory values to measure certain aspects of the health of a business.

For these reasons, and because changes in commodity and other materials prices affect the value of a company's inventory, it is important to understand how a company accounts for its inventory. Common inventory accounting methods include first in, first out (FIFO), last in, first out (LIFO), and lower of cost or market (LCM). Some industries, such as the retail industry, tailor these methods to fit their specific circumstances. Public companies must disclose their inventory accounting methods in the notes accompanying their financial statements.

Given the significant costs and benefits associated with inventory, companies spend considerable amounts of time calculating what the optimal level of inventory should be at any given time, and changes in inventory levels can send mixed messages to investors. Increases in inventory may signal that a company is not selling effectively, is anticipating increased sales in the near future (such as during the holidays), or has an inefficient purchasing department.

Declining inventories may signal that the company is selling more than it expected, has a backlog, is experiencing a blockage in its supply chain, is expecting lower sales, or is becoming more efficient in its purchasing activity.

Because there are several ways to account for inventory and because some industries require more inventory than others, comparison of inventories is generally most meaningful among companies within the same industry using the same inventory accounting methods, and the definition of a "high" or "low" inventory level should be made within this context.


INVENTORY Defined for English Language Learners

inventory

play
noun

Definition of inventory for English Language Learners

  • : a complete list of the things that are in a place

  • : a supply of goods that are stored in a place

  • : the act or process of making a complete list of the things that are in a place : the act or process of making an inventory

inventory

verb

Definition of inventory for English Language Learners

  • : to make a complete list of (the things in a place) : to make an inventory of (something)


INVENTORY Defined for Kids

1

inventory

play
noun in·ven·to·ry \ˈin-vən-ˌtȯr-ē\

Definition of inventory for Students

plural

inventories

  1. 1 :  a supply of goods Inventory is low.

  2. 2 :  a list of items (as goods on hand)

  3. 3 :  the act or process of making a list of items


2

inventory

play
verb in·ven·to·ry

Definition of inventory for Students

inventoried

;

inventorying

  1. :  to make a complete list of Store workers inventoried the stock.


Medical Dictionary

inventory

play
noun in·ven·to·ry \ˈin-vən-ˌtōr-ē, -ˌtȯr-\

Medical Definition of inventory

plural

inventories

  1. 1:  a questionnaire designed to provide an index of individual interests or personality traits

  2. 2:  a list of traits, preferences, attitudes, interests, or abilities that is used in evaluating personal characteristics or skills


Law Dictionary

inventory

play
noun in·ven·to·ry \ˈin-vən-ˌtōr-ē\

Legal Definition of inventory

plural

inventories

  1. 1 :  an itemized list of current assets: as a :  a written list or catalog of the property of an individual, organization, or estate or succession that is made by a fiduciary under oath and that usually describes and assigns a value to the items or classes of property b :  aggregate value assigned to an inventory

  2. 2 :  goods or materials held on hand: as a under the Bankruptcy Code :  materials including personal property leased or furnished, held for sale or lease, or to be furnished under a contract for service, raw materials, work in process, or materials used or consumed in a business held for sale or lease b under section 9-109 of the Uniform Commercial Code :  goods that are leased by a person as lessor, that are held by a person for sale or lease or to be furnished under a contract of service or are furnished under a contract of service, or that are raw materials, works in process, or materials used or consumed in a business



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