CHAPTER ONE

1.0              INTRODUCTION

1.1       BACKGROUND OF THE STUDY

“Inventories” and “stock” are used interchangeable in this study.

The most significant component of current asset of majority of predominately large manufacturing companies is constituted by inventories or stock. It has been stated that.

“On an average, inventories are approximately 55% of current assets in public limited companies.

Evidently therefore, the above statements is an affirmation that the greater proportion of the valid, both quantitatively and qualitatively, of what a manufacturing company produces is ascribable to or a factor of the material cost. This element of cost, in other words, represents a large percentage of production cost and as such, special  and careful consideration must be given to materials acquisition, storage and usage. Ben. O. Nweke (Collins) (2000) affirmed this much when he asserted that.

“The holding of these ingredients in the from of stock at a reduced cost serves an important management function. Permits continuous production to meet the need of the consumer at a reasonably cost and time”. Different components of stock are raw materials, work-in-progress and finished goods. Raw materials are those basis input materials that are converted into finished goods through the manufacturing process and they include the units of input, which have been purchase and store for future production.

Work-in-progress inventories are semi-manufacturing products. They represent product that need more work before they become finished goods for sale or consumption.

Finished goods inventories are those completely and fully manufactured products which are ready for sale or consumption. The stock of raw materials and work-in-progress facilities production, while stock of finished goods is required for smooth and effective marketing operations. Inventories therefore serve as a link between the production and the consumption of goods.