Inventory is a company's goods that are ready for sale. Inventory is recorded as a current asset on a company's Balance Sheet.
Companies that sell goods need to have inventory available to supply the demand from consumers and clients.
In order to minimize costs, companies should optimize their inventory to supply customers for a set period of time (see: supply chain). On the flip side, company's that have large inventories or inventories sitting in storage adds incremental expenses that increase the cost of goods sold, thus potentially impacting future earnings, profits, and valuation.