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A positive flow of intended inventory investment occurs when a firm expects that sales will be high enough that the current level of inventories on hand may be insufficient—perhaps because in the presence of very short-term fluctuations in the timing of customer purchases, there is a risk of temporarily being unable to supply the product when a customer demands it.
In macroeconomics, investment "consists of the additions to the nation's capital stock of buildings, equipment, software, and inventories during a year" [1] or, alternatively, investment spending — "spending on productive physical capital such as machinery and construction of buildings, and on changes to inventories — as part of total spending" on goods and services per year.
For example, organizations in the U.S. define inventory to suit their needs within US Generally Accepted Accounting Practices (GAAP), the rules defined by the Financial Accounting Standards Board (FASB) (and others) and enforced by the U.S. Securities and Exchange Commission (SEC) and other federal and state agencies. Other countries often have ...
For example, if an automobile plant produces 1,000 cars, but not all of them are sold, the unsold cars are labelled as inventory investment in the GDP accounts. The income earned by the people who produced those cars is part of aggregate income and the value of all of the cars produced is part of total expenditure.
For example, if the company request a particular raw material from overseas market. Purchase in bulk will save them a lot transportation cost from overseas shipment fees. [citation needed] 5. Dead Inventory. Dead inventory or dead stock is consisting of different kinds of products that was outdated or only a few consumer requests this kind of ...
Different from other motives for inventory management, such as fixed costs (e.g. cyclic inventory in the economic order quantity model), uncertainties in demand and supply (safety stock), and fluctuations in prices (speculative stock), strategic inventories emerge as a distinctive category. [1]
Physical capital represents in economics one of the three primary factors of production. Physical capital is the apparatus used to produce a good and services. Physical capital represents the tangible man-made goods that help and support the production. Inventory, cash, equipment or real estate are all examples of physical capital.
In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. [1] A typical example is the machinery used in a factory. At the macroeconomic level, "the nation's capital stock includes buildings, equipment, software, and inventories during a ...