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Maybe I misunderstand something, but inventory is not an expense until it's sold; it shouldn't influence profit in any way. It seems that what you call profit i
by LudwigNagasena 4y ago
Maybe I misunderstand something, but inventory is not an expense until it's sold; it shouldn't influence profit in any way. It seems that what you call profit is actually free cash flow (profit after taxes minus investments into operating capital).
- fragmede 4y agoMost (but not all) inventory gets old as time goes on, and the 2022 model isn't as cool as the 2023 version. Which is to say, having a bunch of 2023 stuff on hand is a liability until it is sold. Imagine a car dealership right as Covid shuts things down in 2020.
- eande 4y agoGenerally true, but with the continuous saga of component shortage and that market dynamic has shifted over time from a broad shortage to specific segments particular newer, high end ICs type you can't reliably get your hands-on having inventory and liability on the books is still a better way to go for now. My current large corp employer is making hardware products and I can not tell you how much more even in 2023 time and effort is spent by teams procuring material to keep production up, including pushing hard on our suppliers.
- LudwigNagasena 4y agoIt may be a risk, but it certainly isn’t a liability in the financial sense.