Dead stock

Definition

Inventory with no movement and no likely buyer, usually project residue or a superseded part.

Why It Matters

It is the trade's characteristic problem and it sits at cost until somebody decides otherwise, which means the earnings a seller quotes rest on a judgement nobody has audited. The test is not whether dead stock exists, because it always does, but whether the house has a habit of finding it. A written write-off policy, a rotation program with the manufacturers and a recent count are the three signs. Where none of them exists, discount the inventory and not the multiple.