Management can choose whichever method suits their business. Inventory is accounted in three ways: First in, First out ( FIFO ), Last in, First Out ( LIFO ), and Weighted average method. In Tata Motor’s case, finished cars are the finished goods. As a car maker, all their inventory down the assembly line is considered work-in-progress until it is finished.įinished Goods – Finished goods are products ready to sell to retailers, end users, or wholesalers. Work in Progress – Work in progress includes the company’s partially finished products. When Tata Motor puts all materials into production and starts shaping the metal and cutting the bars, the raw material becomes work in process inventories. Tata Motors buys steel bars, sheet metal, and tubing to manufacture vehicle frames and parts.

Raw Material – Raw material builds a block to make a final product.

Inventory is categorized into the following categories – An analyst looks into details of inventory turnover and compares them with a similar industry to understand the efficiency of handling inventory. Inventory carrying capacity and turnaround are majorly tracked majors for tracking the optimum level of inventory required for the business. An optimum level of inventory is decided by management. Inventory has inventory-carrying costs, so companies try to maintain inventory optimally. From an analyst’s point of view, it matters a lot what is stock and inventory because both give a different view of the company’s financials. Both Stocks vs Inventory have different meanings and must be examined in detail. In layman’s terms, stock and inventory are used interchangeably, but these two things differ for accounting purposes. Using stock and inventory interchangeably is technically wrong also, and it gives misinformation about the company’s financial health one should be careful before using a term. Stock can also have raw materials if the company sells raw materials to customers. Stock is a finished product ready to sell in a marketplace. Inventory is generally found in manufacturing companies service-based companies don’t have to carry inventory. In other words, the inventory includes finished products ready to sell, work-in-progress goods not fully converted, and raw materials required to create the product. Inventory is a raw material for making the product, work-in-progress goods, and finished product.

Stock inventory meaning