What is Stock Valuation?
Stock valuation is the money value of the inventory a business holds on a date, usually counted at cost.
Updated
Meaning
English
Stock valuation is the money value of the inventory a business holds on a date, usually counted at cost.
Roman Urdu
Stock valuation kisi tareekh par dukaan me maujood maal ki raqam hai, aam taur par cost par gini jati hai.
Also called inventory valuation, stock value, closing stock value.
Example
On 30 June a pharmacy's stock is valued at 3.1 million rupees at cost and 3.8 million at selling price. The cost figure goes in the year-end accounts; the selling figure shows the profit still on the shelf.
How it works
Stock is usually a shop's biggest asset after the premises, so its value matters for the balance sheet, for bank finance, for insurance and for working out profit, since closing stock is part of the cost of goods sold calculation. Accounting rules value stock at cost, or at the lower of cost and what it can be sold for if items are damaged or obsolete.
Which cost is used matters when prices change: FIFO, weighted average or the actual cost of each batch. Whatever method is used, it should stay consistent from year to year.
In Nafaa
The Nafaa stock report shows stock and its value by branch, with filters for items in stock, low, out, dead, slow, near expiry and items with no cost entered, so missing costs do not distort the value.
Related terms
- COGS (Cost of Goods Sold)
Cost of goods sold is the purchase cost of the items a business actually sold in a period, which is subtracted from sales to find gross profit.
- FIFO (First In, First Out)
FIFO is the stock rule that the oldest stock is sold first.
- Stock Take
A stock take is a physical count of the goods on the shelves and in the store, compared with what the system says should be there.
- Inventory Turnover
Inventory turnover is how many times a business sells through its average stock in a period, calculated as cost of goods sold divided by average stock at cost.