Inventory refers to the physical stock maintained in the warehouses of the organization. Inventory consists of several types of raw material which are explained in detail given below:

1. Raw materials represents the inventory which is required primarily for production of the good and the basic form in which it is available.

2. Semi-Finished Goods represent the raw material which is processed to a certain extent which can be converted into a finished good.

3. Work In progress goods represent that some work is done in the conversion of the raw material and the conversion work is in progress.

4. Finished Goods represent the completed product which is ready to be sold in the market.

Thus, it represents the volume of materials kept in stock by the company for future use.