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NJ5 said:

@Squilliam: On second thought, I don't understand why stocked inventory is important for this debate. That stock was built in the past so its production cost was already written off (or converted into an asset valued at the price they'll sell it for). In conclusion, its cost of production doesn't affect future earnings. Price and currency drops do, though, as they reduce the asset's value.

 

Because theres often a 6 month lag between production and sale for goods such as TVs and Stereos etc. A higher cost of production and lower earnings due to currency fluxuations are a bad combination. The cost hasn't been accounted for because inventory is considered an asset rather than an expense. When an asset reduces in value, such as depreciations or a writedown its considered an expense.

A TV produced this week will cost a lot less, as the LCD prices, material prices, shipping prices etc are all dropping.

 



Tease.