Say Company XYZ produces 5,000 units during the course of a year and sells 2,000 units. The following year, Company XYZ will have a beginning inventory of 3,000 units.
Why Does Beginning Inventory Matter?
Beginning inventory is an important indicator of what a company will be ordering for the upcoming year. It can also be used to project coming costs for a company to ramp up production or coming revenues for its suppliers.