What are inventories and how do we represent them in the balance sheet?



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Hi sir,
question from 3rd lecture:
could you please explain me about inventories?brackets"( )" are used to write some values. What they represent?
Thank you!

3 Answer(s)


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Hi Ramu,

Companies that make tangible products - such as food, machinery, automotive, steel etc - store raw materials needed to make these products. These raw materials are generally referred to as inventories.

For example a company that makes pizza will have vegetables, cheese, oil etc as inventory. A company that makes computers will have monitors, hard drives etc as inventories.

() are generally used to denote negative numbers. Could you please point out where you saw those, so I can make sure its the right interpretation.

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In 3rd video lecture...
income statement of domino's pizza(There is one row for inventories...there i find it)

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Thanks for pointing out. I believe you are referring to the line item "Decrease/Increase in Inventories" in Dominos' Income Statement. That line item is the expense incurred by Dominos to buy additional inventory such as vegetables, pizza dough, cheese etc. In years such as 2005, 2006 and 2007 its a positive number, which means there was an increase in inventory and Dominos spend additional money replenishing its inventory. In 2008 and 2009, the negative numbers mean that there was a decrease in inventory and some of the inventory expense is already included in the "Raw materials consumed" line item. So inventory is negative to prevent double counting since raw materials is taken out of inventory.

Please let me know if you this is not clear and if you would like to get on a call to clarify this. Thanks.