Inventory
An organisation requires items or products in order to operate. These items are collectively called Inventory. The term inventory refers to all the materials or products held by an organisation which is needed to fulfil the needs of the customer. There are various forms of inventory and can be split into four main categories as shown in Figure 1:
Figure 1: Types of Inventory
It is important not to confuse inventory with other items that are owned by the company such as buildings and machinery. These are known as fixed assets as they are purchased for long term use and cannot easily be converted into cash. In financial reports, inventory is referred to as current assets.