Originally published on January 9, 2023
Last updated on March 6, 2026
Is Inventory Considered a Current Asset?
Whether your business deals in raw materials, components and parts or finished products, your inventory is an essential source of potential revenue. It represents a significant investment and is part of your total current assets. Learn more about what current assets are and the best way to calculate and use your current assets. What Is […]
Whether your business deals in raw materials, components and parts or finished products, your inventory is an essential source of potential revenue. It represents a significant investment and is part of your total current assets.
Learn more about what current assets are and the best way to calculate and use your current assets.
What Is Considered a Current Asset?
In financial terms, a current asset refers to all the assets a company owns that it can convert to cash within one year. On a balance sheet, current assets represent what a company has immediate ownership of. They demonstrate its short-term liquidity and ability to pay its current obligations.
A company might also have items on its balance sheet indicating long-term assets or non-current assets. These include assets they can’t convert to cash within a year, such as properties, buildings, plants, equipment and facilities. While a current asset’s value depends on its current fair market value, a long-term asset’s value is tied to its purchase price.
A breakdown of current assets on a company’s balance sheet might include:
Cash: Cash refers to the funds a company has at that moment.
Cash equivalents: On top of cash, cash equivalents include certificates of deposit, short-term government bonds, treasury bills and money market funds.
Accounts receivable: The accounts receivable section indicates all the money that customers or clients owe the company. Accounts receivable represent payment the company has not yet received for goods or services that they’ve delivered.
Pre-paid liabilities: Advance payments, such as payments to insurance providers or contractors, are considered pre-paid liabilities. Although companies can’t necessarily convert them to cash, they qualify as current assets because they free up capital for other uses.
Marketable securities: A company’s marketable securities include all the liquid investments they can quickly convert to cash without impacting the market value. For example, if converting shares of a company would reduce their overall market value, they would not qualify as marketable securities.
Other liquid assets: While most liquid assets qualify as marketable securities, others may not. For example, a company might have excess funds invested in a short-term security that it can access if needed.
Is Inventory a Current Asset?
Inventory is often also a current asset. A company’s inventory includes all its raw materials, components and finished products. In almost all cases, inventory is a current asset because a company can liquidate it within a year. However, there are situations where inventory is a long-term asset.
Some factors that impact whether inventory is a current asset include:
Industry: Companies in certain industries might be able to liquidate their assets more quickly than others. An air conditioner manufacturer may find it easier to liquidate their inventory within a year than an oil tanker manufacturer.
Market conditions: Spending and market conditions might also affect the liquidity of a company’s inventory — it’s more challenging to sell inventory during economic downtrends and recessions.
Demand: As demand rises and falls, it can impact whether inventory is a current asset for a company. For example, if demand plummets for a company’s products due to market saturation, it can affect its ability to liquidate its inventory within a year.
How to Calculate Current Assets
Calculating a company’s current assets involves adding together all the assets they can liquidate within a year. On a balance sheet, you might see acronyms standing in for the different sections:
Cash — C
Cash equivalent — CE
Inventory — I
Accounts receivable — AR
Prepaid expenses — PE
Marketable securities — MS
Other liquid assets — OLA
The general formula for calculating current assets is C + CE + I + AR + PE + MS + OLA = Current Assets total. Most balance sheets will already total all sections of a company’s current assets.
The following are three examples of what a company’s balance sheet might look like, with a breakdown of the different components that go into calculating the total current assets:
Example #1 — META
In the third quarter of 2022, META, the new name for Facebook, had a total of $58,315 million. The breakdown on their balance sheet in millions of USD reads:
Cash and cash equivalents: $14,308
Accounts receivable: $11,227
Inventory: N/A
Marketable securities: $27,468
Prepaid expenses: $5,080
Other liquid assets: $232
Since META has no inventory to speak of, they don’t list that value on their balance sheet. META’s total current assets are $8,351 million less in the third quarter of 2022 than in the final quarter of 2021.
Example #2 — Subaru Corp
The car manufacturer Subaru Corp has significant inventory, which plays a larger role in its current assets. The breakdown on their balance sheet in millions of Japanese Yen reads:
Cash and cash equivalents: ¥1,041,811
Accounts receivable: ¥335,879
Inventory: ¥607,743
Marketable securities: ¥271,484
Prepaid expenses: N/A
Other liquid assets: ¥95,912
In the third quarter of 2022, they had around ¥2.3 billion in total current assets.
Example #3 — Kroger
Kroger, a U.S. grocer, pulled in $13,403 million in the third quarter of 2022. Their current assets as of September 30 include:
Cash and cash equivalents: $241 million
Accounts receivable: $2,019 million
Inventory: $8,666 million
Marketable securities: $675 million
Prepaid expenses: $593 million
Other liquid assets: $1,209 million
How Can Businesses Use Current Assets?
Companies can use their current assets for various purposes, including:
Financing day-to-day operations: A lot goes into a company’s daily operations. Large corporations likely have enormous day-to-day costs that can include rent, salaries, purchasing and other operational expenses. Businesses can use their current assets to fund these operations.
Managing working capital: Your business needs to manage its working capital to avoid cash flow issues. A positive working capital means a company has enough current assets to pay off its liabilities.
Determining liquidity ratios: You can discover a lot about a company when you look at its liquidity ratios, which give you a picture of its financial health. For example, a current ratio tells a business if it can feasibly repay its short-term obligations with its current cash or cash-equivalent resources.
Trust Finale Inventory for Inventory Management and Accounting Solutions
Finale Inventory offers a highly-scalable inventory management system perfect for e-commerce businesses of all sizes and industries. Accounting functions are essential to keep track of your current assets and make informed decisions about your business. With our accounting features, you get various inventory accounting capabilities, including charts of accounts with QuickBooks integrations, general ledger transactions and reports and inventory valuation reports.
Finale Inventory’s software is intuitive and easy to use and our team of professionals is here to support and guide you with unparalleled service. When you work with us, you’ll receive a personal customer relationship manager to answer any questions you have along the way.
Schedule a demo and see what Finale Inventory can do for you!
“The core of maturity, that I see, is starting with a unified view of inventory. I’ve got to be able to accurately represent what do I have, make sure that I know where it’s located so I can get it to my customers quickly.”
— Troy Graham, Descartes
What is the first thing I should fix if I want to scale operations?
Start with a unified view of inventory. The core of maturity starts with being able to accurately represent what you do have and make sure that you know where it’s located to get it to customers quickly. Without a unified view across your warehouses, 3PLs, and vendors, you cannot make the best decisions because you don’t have the best information at hand.
With Inventory Visibility, Businesses Can Make Smarter Allocation Decisions
Once inventory is centralized, businesses can move from reactive updates to intentional allocation. They can decide how much inventory to expose to each channel, when to use buffers, which marketplaces need extra protection, and how seasonality or campaign performance influence availability.
Once I know what inventory I have, how should I decide where to make it available?
Inventory allocation should reflect where orders are coming from, where marketing is working, and which channels carry the most risk. Once you know what you have and where it is located, you can think more strategically using centralized inventory to make prioritization happen automatically. One fertilizer company lost a little over 5,000 orders in one weekend because someone manually uploaded the wrong available inventory to Amazon.
Better Inventory Data Improves Planning, Purchasing, and Growth Bets
Better visibility turns inventory data into a planning tool. With insight into sales velocity, inventory levels, vendors, and channel performance, businesses can make more informed replenishment decisions, avoid overbuying, and test new product lines or vendor-supplied inventory without taking on unnecessary risk.
“You have to have unified inventory to know how to price your products just at that basic level. I can’t price my products if I don’t know the true cost to get it.”
— Mike Bernico, Flxpoint
How does better inventory data help me make smarter buying decisions?
It lets you measure whether your plan is working before you commit more capital. A key question becomes: “Did my plan work? Am I overleveraged in one place or another?” Centralized systems can also help businesses test new product lines or vendor relationships by looking at sales velocity by channel, allowing them to take risks in a calculated and measured way.
Intelligent Order Routing Turns Inventory Complexity Into Automation
Once inventory and supplier data are reliable, businesses can automate fulfillment decisions. Orders can be routed based on cost, speed, margin, location, warehouse priority, vendor fallback, split-shipment rules, or customer expectations. This helps hybrid fulfillment scale because every order does not need a manual review.
How do I decide the best way to fulfill each order?
There is no single answer, which is why order routing needs to account for the context of each order. Intelligent order routing is not just sending an order to someone who has stock; it is taking each and every order and treating it like its own unique use case. Depending on the order, the business may prioritize speed, margin, an internal warehouse, vendor fallback, or preventing split shipments.
Supplier Inventory Sync Extends Inventory Beyond the Four Walls
For hybrid fulfillment to work, supplier inventory needs to become part of the operating model. Supplier sync does not always require advanced technology; it can happen through automated files, FTP, email, APIs, EDI, or ecommerce storefront integrations. The key is replacing manual updates with automated, reliable supplier data.
Can supplier inventory really be treated like part of my own inventory?
Yes, but the goal is not necessarily to force every supplier into a complex integration. Real-time supplier sync can be defined as any way to get an automated update from a supplier, such as Google Sheets, email, FTP, API, EDI, or ecommerce storefront connections. The key is that accurate supplier stock is foundational. If you don’t have an accurate view of what is in stock with your suppliers, you cannot tell your sales channel accurately what’s available.
Exception-Based Workflows Keep Humans Focused Where They Matter
Automation does not remove people from the process. Mature operations let technology handle the routine majority while humans focus on exceptions, such as high-value orders, fraud risk, compliance requirements, restricted products, export rules, or unusual fulfillment scenarios.
If my business has special cases, can automation still work?
Yes. The point is not to automate every possible decision; it is to automate the routine work and surface the exceptions. Businesses should not have to look at every single order. Instead, technology can highlight high-value orders, risky locations, or compliance requirements. The goal is to take care of the 80% of workflows that are obvious while still allowing human review when specific exceptions arise.
The Right Inventory Technology Should Fit the Business, Not Overwhelm It
Software decisions should be based on business fit, not popularity, feature volume, or broad “all-in-one” promises. Growing ecommerce businesses should identify their highest-impact bottleneck, prioritize what matters now, and choose technology that is right-sized but flexible enough to support future phases of growth.
How should I choose software without overbuying or picking the wrong system?
Start with your priorities, not the biggest feature list. Avoid an all-in-one system that claims to “do everything under the sun” and look for a “best of breed approach” with systems that can scale as you add channels or vendors. The practical advice is to stack rank what matters now, make sure the system can support future phases, and choose technology that fits your business rather than overwhelming it.
How to Scale Ecommerce Operations Beyond Spreadsheets
For many growing ecommerce businesses, Finale and Flxpoint work together as a practical answer to these challenges. Finale helps centralize and manage internal inventory, purchasing, warehouse operations, and stock visibility, while Flxpoint helps connect vendor inventory, automate supplier sync, and route orders across hybrid fulfillment networks. Together, they give businesses a best-of-breed way to improve inventory accuracy, reduce spreadsheet work, and scale fulfillment without forcing every process into a one-size-fits-all system.
Ecommerce Fulfillment Operations FAQ
What Is Ecommerce Fulfillment Operations?
Ecommerce fulfillment operations are the processes that move an online order from purchase to delivery. This includes managing inventory, syncing product availability across channels, routing orders to the right warehouse, 3PL, supplier, or vendor, and making sure the customer receives the right product on time. As discussed in the webinar, fulfillment is no longer limited to “what’s in my warehouse these days”; growing businesses may rely on internal warehouses, 3PLs, marketplace fulfillment services, and supplier inventory at the same time.
What Are Ecommerce Fulfillment Operation Examples?
Examples of ecommerce fulfillment operations include updating inventory across Shopify, Amazon, Walmart, and other sales channels; allocating inventory to specific marketplaces; sending orders to an internal warehouse, 3PL, or vendor; syncing supplier inventory through files, APIs, EDI, email, or FTP; replenishing warehouse stock based on sales velocity; and flagging exceptions such as high-value orders, compliance requirements, or restricted products. In the webinar, the speakers also discussed hybrid fulfillment examples where a business may fulfill some products from its own warehouse and use vendors as a fallback or extension of available inventory.
How Can I Track My Inventory at an Ecommerce Fulfillment Center?
The best way to track inventory at an ecommerce fulfillment center is to create a unified inventory view that shows what is available, where it is located, and how that inventory connects to each sales channel. That means tracking inventory across internal warehouses, fulfillment centers, 3PLs, marketplace fulfillment programs, and supplier locations instead of relying on disconnected spreadsheets. The webinar emphasized that businesses need to “accurately represent” what they have and know where it is located so they can get products to customers quickly.
How Can I Connect My Inventory to My Supplier?
You can connect supplier inventory through several methods, depending on what the supplier supports. The webinar discussed low-tech and advanced options, including automated Excel or CSV files, Google Sheets, email updates, FTP servers, APIs, EDI, and direct connections to ecommerce storefronts such as Shopify, BigCommerce, or Magento. The key is to ask suppliers how they share inventory today, then use a system that can automate that data flow instead of manually copying supplier inventory into spreadsheets.
What Is Ecommerce Order Routing?
Ecommerce order routing is the process of deciding where an order is fulfilled from after a customer buys. In a simple operation, every order may go to one warehouse. In a more complex or hybrid fulfillment model, the best fulfillment source may depend on inventory availability, shipping speed, cost, margin, customer location, warehouse priority, vendor fallback rules, or whether the order should be split. The webinar described intelligent order routing as treating each order like its own use case, so businesses can automate the best fulfillment decision without manually reviewing every order.
