3
Valuing Inventories for the Balance Sheet
In This Chapter
Understanding Perpetual and Periodic Inventory Systems
Particularly for a business that manufactures or resells tangible goods, the size of the company’s inventory exerts a powerful influence on its profitability. The inventory of goods is often the company’s principal current asset, and therefore it contributes heavily to the company’s net worth. And the cost of goods sold (COGS) depends on the value of the stock that the company markets, so inventory also figures into the company’s gross profit and its net income.
Because inventory is so important to a company’s worth and ...
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