Finished Goods Definition
Finished Goods are items that have completed all phases of production and are ready for sale.
Finished Goods is a term given to items that have completed all phases of production and are now ready for sale. It is one of the few elements that comprise of the Inventory amount found on a companys balance sheet. An alternative name given to Finished Goods may be Merchandise. Although the term Merchandise may also be given to items purchased in an already completed form. They will typically be classed as current assets with expectency for them to be sold with the next 12 months.
The number of finished Goods should correlate well to the company and meet its supply and demand requirements. A constant shortage of Finished Goods can lead to a potential loss of sales. On the other hand, excess of Finished Goods can also be disadvantageous as they may be prone to becoming obsolete which will result in them being written off as debits meaning a loss of money and profit.
Being a current asset, Finished Goods will tell us how much revenue a comapny may be able to generate within the near future. As Finished Goods are a component of companys Inventory it is a a key driver for profitibaly and can mean for more subsequent earnings for its shareholders. The amount of Finished Goods acts as an excellent complimentary figure that should certainly be used with other metrics when evaluating a company.