0
$\begingroup$
  1. Inventory change=last period's ending inventory- the current period's ending inventory.
  2. Change in inventory= production of the firm during the year- sale of the firm during the year

No doubt in (1) but in (2) "production of the firm during the year- sale of the firm during the year" tells about remaining part which is unsold. How could we say unsold product is "change in inventory"?

Numerical example to this? Gross value added (GVA) = Value of sales by the firm + Value of change in inventories – Value of intermediate goods used by the firm.

|improve this question
$\endgroup$
0
$\begingroup$

Example. In 2018, TATA Motors produced 100,000 cars and sold 70,000. So, the remaining unsold 30,000 cars are added to TATA Motors's inventory (in practical terms, they may be sitting in some warehouses or carparks). Hence, the change in inventory is +30,000 cars.

|improve this answer
$\endgroup$
  • $\begingroup$ So, Gross value added (GVA) = Value of sales by the firm + Value of change in inventories – Value of intermediate goods used by the firm. In this "Value of change in inventories" is 30,000 am I right? $\endgroup$ – Raju Jan 29 '19 at 6:03

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.