Definition of Book inventory

Book inventory

The amount of money invested in inventory, as per a company’s
accounting records. It is comprised of the beginning inventory balance, plus the
cost of any receipts, less the cost of sold or scrapped inventory. It may be significantly
different from the actual on-hand inventory, if the two are not periodically
reconciled.

Blanket inventory lien

A secured loan that gives the lender a lien against all the borrower's inventories.

Book

A banker or trader's positions.

Book

cash A firm's cash balance as reported in its financial statements. Also called ledger cash.

Book profit

The cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT.

Book runner

The managing underwriter for a new issue. The book runner maintains the book of securities sold.

Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.

Book value per share

The ratio of stockholder equity to the average number of common shares. book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory.

Inventory

For companies: Raw materials, items available for sale or in the process of being made ready for
sale. They can be individually valued by several different means, including cost or current market value, and
collectively by FIFO, LIFO or other techniques. The lower value of alternatives is usually used to preclude
overstating earnings and assets.
For security firms: securities bought and held by a broker or dealer for resale.

Inventory loan

A secured short-term loan to purchase inventory. The three basic forms are a blanket
inventory lien, a trust receipt, and field warehousing financing.

Inventory turnover

The ratio of annual sales to average inventory which measures the speed that inventory
is produced and sold. Low turnover is an unhealthy sign, indicating excess stocks and/or poor sales.

Just-in-time inventory systems

Systems that schedule materials/inventory to arrive exactly as they are
needed in the production process.

Limit order book

A record of unexecuted limit orders that is maintained by the specialist. These orders are
treated equally with other orders in terms of priority of execution.

Market-book ratio

Market price of a share divided by book value per share.

Matched book

A bank runs a matched book when the distribution of maturities of its assets and liabilities are equal.

Net book value

The current book value of an asset or liability; that is, its original book value net of any
accounting adjustments such as depreciation.

Open book

See: unmatched book.

Price/book ratio

Compares a stock's market value to the value of total assets less total liabilities (book
value). Determined by dividing current stock price by common stockholder equity per share (book value),
adjusted for stock splits. Also called Market-to-book.

Short book

See: unmatched book.

Stockholder's books

Set of books kept by firm management for its annual report that follows Financial
Accounting Standards Board rules. The tax books follow IRS tax rules.

Tax books

Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
books follow Financial Accounting Standards Board rules.

Unmatched book

If the average maturity of a bank's liabilities is less than that of its assets, it is said to be
running an unmatched book. The term is commonly used with the Euromarket. Term also refers to the
condition when a firm enters into OTC derivatives contracts and chooses to hedge that risk by not making
trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched
book hedges its net market risk with futures and options, usually.
Related expressions: open book and short book.

BOOK VALUE

An asset’s cost basis minus accumulated depreciation.

BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. book value equals:
(Stockholders’ equity) / (Common stock shares outstanding)

INVENTORY TURNOVER

The number of times a company sold out and replaced its average stock of goods in a year. The formula is:
(Cost of goods sold) / (Average inventory (beginning inventory + ending)/2 )

MERCHANDISE INVENTORY

The value of the products that a retailing or wholesaling company intends to resell for a profit.
In a manufacturing business, inventories would include finished goods, goods in process, raw materials, and parts and components that will go into the end product.

Inventory

Goods bought or manufactured for resale but as yet unsold, comprising raw materials, work-in-progress and finished goods.

Inventory

The cost of the goods that a company has available for resale.

Periodic inventory system

An inventory system in which the balance in the inventory account is adjusted for the units sold only at the end of the period.

Perpetual inventory system

An inventory system in which the balance in the inventory account is adjusted for the units sold each time a sale is made.

book value and book value per share

Generally speaking, these terms
refer to the balance sheet value of an asset (or less often of a liability) or
the balance sheet value of owners’ equity per share. Either term emphasizes
that the amount recorded in the accounts or on the books of a business
is the value being used. The total of the amounts reported for
owners’ equity in its balance sheet is divided by the number of stock
shares of a corporation to determine the book value per share of its capital
stock.

inventory shrinkage

A term describing the loss of products from inventory
due to shoplifting by customers, employee theft, damaged and
spoiled products that are thrown away, and errors in recording the purchase
and sale of products. A business should make a physical count and
inspection of its inventory to determine this loss.

inventory turnover ratio

The cost-of-goods-sold expense for a given
period (usually one year) divided by the cost of inventories. The ratio
depends on how long products are held in stock on average before they
are sold. Managers should closely monitor this ratio.

inventory write-down

Refers to making an entry, usually at the close of a
period, to decrease the cost value of the inventories asset account in
order to recognize the lost value of products that cannot be sold at their
normal markups or will be sold below cost. A business compares the
recorded cost of products held in inventory against the sales value of the
products. Based on the lower-of-cost-or-market rule, an entry is made to
record the inventory write-down as an expense.

Book Value

The value of an asset as carried on the balance sheet of a
company. In reference to the value of a company, it is the net worth
(equity) of the company.

Book Value per Share

The book value of a company divided by the number of shares
outstanding

Inventory Turnover Ratio

Provides a measure of how often a company's inventory is sold or
"turned over" during a period. It is calculated by dividing the sales
figure for the period by the book value of the inventory at the end of
the period.

Market to Book Ratio

Measure of the book value of a company on a per share basis. It is
calculated by dividing the book value of the company by the
number of common shares outstanding.

dollar days (of inventory)

a measurement of the value of inventory for the time that inventory is held

open-book management

a philosophy about increasing a firm’s performance by involving all workers and by ensuring
that all workers have access to operational and financial
information necessary to achieve performance improvements

vendor-managed inventory

a streamlined system of inventory
acquisition and management by which a supplier can
be empowered to monitor EDI inventory levels and provide
its customer company a proposed e-order and subsequent
shipment after electronic acceptance

Average inventory

The beginning inventory for a period, plus the amount at the end of
the period, divided by two. It is most commonly used in situations in which just
using the period-end inventory yields highly variable results, due to constant and
large changes in the inventory level.

Book value

An asset’s original cost, less any depreciation that has been subsequently incurred.

Finished goods inventory

Goods that have been completed by the manufacturing
process, or purchased in a complete form, but which have not yet been sold to
customers.

Moving average inventory method

An inventory costing methodology that calls for the re-calculation of the average cost of all parts in stock after every purchase.
Therefore, the moving average is the cost of all units subsequent to the latest purchase,
divided by their total cost.

Perpetual inventory

A system that continually tracks all additions to and deletions
from inventory, resulting in more accurate inventory records and a running total for
the cost of goods sold in each period.

Raw materials inventory

The total cost of all component parts currently in stock that
have not yet been used in work-in-process or finished goods production.

Work-in-process inventory

inventory that has been partially converted through the
production process, but for which additional work must be completed before it can
be recorded as finished goods inventory.

book rate of return

Accounting income divided by book value.
Also called accounting rate of return.

book value

Net worth of the firm’s assets or liabilities according
to the balance sheet.

Inventory

Goods that a firm stores in anticipation of its later sale or use as an input.

Average-Cost Inventory Method

The inventory cost-flow assumption that assigns the average
cost of beginning inventory and inventory purchases during a period to cost of goods sold and
ending inventory.

Book Income

Pretax income reported on the income statement.

First-In, First-Out (FIFO) Inventory Method

The inventory cost-flow assumption that
assigns the earliest inventory acquisition costs to cost of goods sold. The most recent inventory
acquisition costs are assumed to remain in ending inventory.

Inventory

The cost of unsold goods that are held for sale in the ordinary course of business or
that will be used or consumed in the production of goods to be sold.

Inventory Days

The number of days it would take to sell the ending balance in inventory at the
average rate of cost of goods sold per day. Calculated by dividing inventory by cost of goods sold
per day, which is cost of goods sold divided by 365.

Inventory Shrinkage

A shortfall between inventory based on actual physical counts and inventory
based on book records. This shortfall may be due to such factors as theft, breakage, loss, or
poor recordkeeping.

Last-In, First-Out (LIFO) Inventory Method

The inventory cost-flow assumption that assigns the most recent inventory acquisition costs to cost of goods sold. The earliest inventory
acquisition costs are assumed to remain in ending inventory.

ABC inventory classification

A method for dividing inventory into classifications,
either by transaction volume or cost. Typically, category A includes that 20% of
inventory involving 60% of all costs or transactions, while category B includes
the next 20% of inventory involving 20% of all costs or transactions, and category
C includes the remaining 60% of inventory involving 20% of all costs or
transactions.

Distribution inventory

inventory intended for shipment to customers, usually
comprised of finished goods and service items.

Ending inventory

The dollar value or unit total of goods on hand at the end of an
accounting period.

Finished goods inventory

Completed inventory items ready for shipment to
customers.

Fluctuation inventory

Excess inventory kept on hand to provide a buffer against
forecasting errors.

Hedge inventory

Excess inventories kept on hand as a buffer against contingent
events.

Inactive inventory

Parts with no recent prior or forecasted usage.

In-transit inventory

inventory currently situated between its shipment and delivery
locations.

Inventory

Those items included categorized as either raw materials, work-inprocess,
or finished goods, and involved in either the creation of products or service
supplies for customers.

Inventory adjustment

A transaction used to adjust the book balance of an inventory
record to the amount actually on hand.

Inventory diversion

The redirection of parts or finished goods away from their intended
goal.

Inventory issue

A transaction used to record the reduction in inventory from a location,
because of its release for processing or transfer to another location.

Inventory receipt

The arrival of an inventory delivery from a supplier or other
company location.

Inventory returns

inventory returned from a customer for any reason. This receipt
is handled differently from a standard inventory receipt, typically into an inspection
area, from which it may be returned to stock, reworked, or scrapped.

Inventory turnover

The number of times per year that an entire inventory or a
subset thereof is used.

Maximum inventory

An inventory item’s budgeted maximum inventory level,
comprising its preset safety stock level and planned lot size.

Minimum inventory

An inventory item’s budgeted minimum inventory level.

Net inventory

The current inventory balance, less allocated or reserved items.

Obsolete inventory

Parts not used in any current end product.

Periodic inventory

A physical inventory count taken on a repetitive basis.

Perpetual inventory

A manual or automated inventory tracking system in which
a new inventory balance is computed continuously whenever new transactions
occur.

Physical inventory

A manual count of the on-hand inventory.

Reconciling inventory

The process of comparing book to actual inventory balances,
and adjusting for the difference in the book records.

Seasonal inventory

Very high inventory levels built up in anticipation of large
seasonal sales.

Surplus inventory

Parts for which the on-hand quantity exceeds forecasted
requirements.

Vendor-managed inventory

The direct management and ownership of selected
on-site inventory by suppliers.

Inventory Turnover

Ratio of annual sales to inventory, which shows how many times the inventory of a firm is sold and replaced during an accounting period.

Book Returns

book yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets.

sunk cost

A cost that has been paid and cannot be undone or reversed.
Once the cost has been paid, it is irretrievable, like water over the dam
or spilled milk. Usually, the term refers to the recorded value of an asset
that has lost its value in the operating activities of a business. Examples
are the costs of products in inventory that cannot be sold and fixed
assets that are no longer usable. The book value of these assets should
be written off to expense. These costs should be disregarded in making
decisions about what to do with the assets (except that the income tax
effects of disposing of the assets should be taken into account).

Shrinkage

The excess of inventory listed in the accounting books of record, but which
no longer exists in the actual inventory. Its disappearance may be due to theft, damage,
miscounting, or evaporation.

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