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TODO BSS inventory notes 🔼 📅 2023-11-17
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Inventory or stock refers to :: the quantity of raw materials, work-in-progress and finished goods that a business has on hand at any particular point in time.
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Inventory management will have a significant impact on transformations processes and in operations strategies.
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There are 3 inventory pricing methods to employ regarding both inventory management and financing:
?- LIFO
- FIFO
- JIT
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The goal is to minimise Cost Of Goods Sold (COGS)
- and to maximise unsold stock (business Assets)
- both of which are recorded on balance sheets
Advantages and disadvantages of holding stock
LIFO (last-in-first-out)
- LIFO (last-in-first-out) is :: a method of pricing inventory that assumes that the last goods purchased are also the first goods sold and therefore the cost of each unit sold is the last cost recorded.
- This strategy can have affect the gross and net profit of a business by
overstating costs (COGS) and understating profit.
FIFO (first-in-first-out)
- FIFO (first-in-first-out) is :: a method of pricing inventory that assumes that the first goods purchased are also the first goods sold and therefore the cost of each unit sold is the first cost recorded.
Just-in-time (JIT)
- just-in-time (JIT) is :: an inventory management approach which ensures that the exact amount of material inputs will arrive only as they are needed in the operation process