ACCOUNTING: INVENTORY ASSET OR LIABILITY?

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ACCOUNTING: INVENTORY ASSET OR LIABILITY?

ACCOUNTING: INVENTORY ASSET OR LIABILITY?

In your accounting courses, you have learned that inventory is an asset and has book value, increasing the overall worth of a company. When looking at the ability of a company to pay its bills, outsiders often look at the current ratio, which takes current assets (cash, accounts receivable, and inventory) and divides it by current liabilities (accounts payable, current portion of long-term debt, and taxes payable). The higher the value, the better able a company is to pay its bills. Yet in inventory systems such as CPFR and JIT, operations management will consider inventory as a liability or something that improves the profitability of the company by reducing inventory. Discuss the following:

Is inventory an asset or a liability? Defend your position.
What are the pros and cons of a Just-in-Time (JIT) inventory system?
Where would it be most effective?
When would it be a poor strategic choice? Explain.
This topic is open to debate and can be argued both ways. Press your peers to defend their positions. Ask probing questions. Defend your position with analytical thinking supported by facts.

This is a debate. The discussion should be open and questioning, but not adversarial. One way to approach this method of questioning is to frame the question in a neutral way, such as “Have you considered…”

ACCOUNTING: INVENTORY ASSET OR LIABILITY?

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ACCOUNTING: INVENTORY ASSET OR LIABILITY?

ACCOUNTING: INVENTORY ASSET OR LIABILITY?

In your accounting courses, you have learned that inventory is an asset and has book value, increasing the overall worth of a company. When looking at the ability of a company to pay its bills, outsiders often look at the current ratio, which takes current assets (cash, accounts receivable, and inventory) and divides it by current liabilities (accounts payable, current portion of long-term debt, and taxes payable). The higher the value, the better able a company is to pay its bills. Yet in inventory systems such as CPFR and JIT, operations management will consider inventory as a liability or something that improves the profitability of the company by reducing inventory. Discuss the following:

Is inventory an asset or a liability? Defend your position.
What are the pros and cons of a Just-in-Time (JIT) inventory system?
Where would it be most effective?
When would it be a poor strategic choice? Explain.
This topic is open to debate and can be argued both ways. Press your peers to defend their positions. Ask probing questions. Defend your position with analytical thinking supported by facts.

This is a debate. The discussion should be open and questioning, but not adversarial. One way to approach this method of questioning is to frame the question in a neutral way, such as “Have you considered…”

ACCOUNTING: INVENTORY ASSET OR LIABILITY?