Inventory Valuation Model Considering Profitability

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  • 収益性を考慮した在庫価値評価モデル
  • シュウエキセイ オ コウリョ シタ ザイコ カチ ヒョウカ モデル

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Abstract

<p>Inventory has both aspects of cost and asset. Many companies have implemented inventory reductions taking into account the cost aspect of inventory such as storage cost and depreciation expense. The illiquid stock leads to cash flow stagnation that should be reduced as a negative asset because it will become an expense in the future. On the other hand, inventory is a necessary management resource that produces sales and value thereby increasing cash flow. Excessive inventory leanness would decrease the performance of the company.</p><p>This research proposes a model for evaluating inventory in terms of not only of cost, but also asset value considering the relationship with demand fluctuations and production processes. Inventory is regarded as a distinct activity in the process, and its value is evaluated taking into account the price of the final product, possibility of sales, resource losses and uncertainty of unrealized profit.</p><p>Inventory value is computed applying the model to the manufacturing process of fabric wire for papermaking. The result is that the value of semicompleted product inventory is larger than that of the final products when the possibility of sales is low. It shows that having semi-completed product as inventory is likely to be more profitable than having final product as inventory.</p>

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