stock value - how does it work?

[want2findout]

I was just wondering about stock value. Does it work against you or to your advantage, the more stock you have? It is a limited company and we're currently in the middle of carrying out a stock take. Just wondering out of interest how it all worked. Thanks

[dasherman]

I would say the stock is only worth anything if you have a buyer for it.

[want2findout]

That's very true! but with regards to accounting figures is it better to have more or less stock? Are you taxed on this stock or does it work to your advantage i.e. dividends?

[richafra]

I'm not an accountant - but it wouldn't make any difference to income tax calculations, as you would either have money in the bank, or stock on hand - neither of which is income. There may be a small advantage tax-wise in that you don't receive taxable interest payments for stock on hand, whereas you do for cash in the bank. But this would be more than wiped out by the after-tax interest you have lost by taking your money out of the bank to pay for stock.

As for VAT, obviously you pay this when you buy stock, and can't claim back the input tax immediately, so from a VAT perspective, the less stock the better.

A lot of consultants make a lot of money by advising businesses how to streamline their stock management processes and the best advice is normally to have only as much stock on hand as you need.

[want2findout]

Excellent. Thanks for that.