What is Inventory?

• A. Cash.
• B. Marketable securities.
• C. Prepaid expenses.
• D. A current asset including raw materials, work in process, and finished goods either manufactured or purchased for resale.

Answer: (D)

Inventory is the current asset that represents goods a business intends to sell or use in production. It includes raw materials, work in process, and finished goods, whether these are manufactured in-house or purchased for resale. Raw materials are the inputs, work in process covers items partly completed, and finished goods are ready for sale. This combination captures the full scope of what a company holds for sale or manufacturing.

The other options describe different kinds of assets: cash is cash; marketable securities are investments; prepaid expenses are payments made in advance for future goods or services. Those are not inventory because they aren’t goods held for sale or for use in production.