• Inventory

    Inventory refers to all the materials the company posses during different stages of the production.

    Inventory Types

    It is normally classified into three categories.

    • Raw materials
    • Work-in-progress
    • Finished goods

    Raw materials refer to the initial basic products that are used to develop the end product. For a Steel company, the raw material is iron ore.

    Work-in-progress refers to all the products during the midway of the production. The portion of work-in-progress depends on the length and stages of the production process.

    Finished goods are the final set of inventories which refer to the products which are ready to deliver to client or sell in the market.

    All these terms are specific to a company or an industry. Here finished goods of one company can be used as a raw material for another company.  Also the liquidity (ability to generate cash from the inventories) is different for different stages of inventories.

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