Tip #162: How Is All That Inventory Valued?

tip162 Inventory in the sale of a business can be closely scrutinized by the buyer. In order to determine value, there are important questions. How was it treated on the tax returns and to determine cost of goods? Is the inventory current or is a portion of it old or obsolete? Sometimes, business value is determined without the inventory, but then the cost of inventory will be added at closing. Typically, a count of the inventory is made right before closing to determine the value and will affect the price. If the value is not as anticipated, it could impact not only the value but also a promissory note.