Inventory
* INTRODUCTION “Adequate inventories facilitates production activities and help to customers satisfaction by providing good service.”
The basic financial aim of an enterprise is maximization of its value. At the same time, a large both theoretical and practical meaning has the research for determinants increasing the firm value. Most financial literature contains information about numerous factors influencing the value. Among those factors is the net working capital and elements creating it, such as the level of cash tied in accounts receivable, inventories and operational cash balances. A large majority of classic financial models proposals, relating to the optimum current assets management, were constructed with net profit maximization in view. In order to make these models more suitable for firms, which want to maximize their value, some of them must be reconstructed. In the sphere of inventory management, the estimation of the influence of changes in a firm’s decisions is a compromise between limiting risk by having greater inventory and limiting the costs of inventory. It is the essential problem of the corporate financial management. The basic financial inventory management aim is holding the inventory to a minimally acceptable level in relation to its costs. Holding inventory means using capital to finance inventory and links with inventory storage, insurance, transport, obsolescence, wasting and spoilage costs. However, maintaining a low inventory level can, in turn, lead to other problems with regard to meeting supply demands. The inventory management policy decisions, create the new inventory level in a firm. It has the influence on the firm value. It is the result of opportunity costs of money tied in with inventory and generally of costs of inventory managing. Both the first and the second involve modification of future free cash flows, and in consequence the firm value changes.
The basic financial aim of an enterprise is maximization of its value. At the same time, a large both theoretical and practical meaning has the research for determinants increasing the firm value. Most financial literature contains information about numerous factors influencing the value. Among those factors is the net working capital and elements creating it, such as the level of cash tied in accounts receivable, inventories and operational cash balances. A large majority of classic financial models proposals, relating to the optimum current assets management, were constructed with net profit maximization in view. In order to make these models more suitable for firms, which want to maximize their value, some of them must be reconstructed. In the sphere of inventory management, the estimation of the influence of changes in a firm’s decisions is a compromise between limiting risk by having greater inventory and limiting the costs of inventory. It is the essential problem of the corporate financial management. The basic financial inventory management aim is holding the inventory to a minimally acceptable level in relation to its costs. Holding inventory means using capital to finance inventory and links with inventory storage, insurance, transport, obsolescence, wasting and spoilage costs. However, maintaining a low inventory level can, in turn, lead to other problems with regard to meeting supply demands. The inventory management policy decisions, create the new inventory level in a firm. It has the influence on the firm value. It is the result of opportunity costs of money tied in with inventory and generally of costs of inventory managing. Both the first and the second involve modification of future free cash flows, and in consequence the firm value changes.