Practicing Success
Which of the following is not included in inventory investment? |
Change in the stock of finished goods Change in the stock of semi-finished good Change in the stock of raw material Change in sales during the year |
Change in sales during the year |
The correct answer is option 4: Change in sales during the year Change in sales during the year: This is not included in inventory investment. Changes in sales reflect changes in revenue generated by selling goods, not changes in the stock of goods held by firms. Inventories are treated as capital. Addition to the stock of capital of a firm is known as investment. Therefore, change in the inventory of a firm is treated as investment. Inventory in the firm can be in 3 forms i.e. Raw material, Unfinished products or WIP and Finished stock of goods. |