Inventory fundamentals
Stock value, revenue, and gross profit
Follow a worked example using the same quantities and costs shown in Inventory reports.
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Stock value describes what remains
Consider an example product with 40 units on hand and a purchase cost of $8 per unit. Its stock value at that cost is 40 × $8 = $320. A selling price of $15 does not turn the stock-value figure into $600.
Inventory’s value report describes stock at purchase cost. Check costs and quantities before interpreting a change in value: either input can move the result.
A sale describes what left and what it brought in
Now record a sale of five units at $15 each, with $8 cost recorded for each unit. Assume no other movements or cost changes.
| Measure | Calculation | Result |
|---|---|---|
| Revenue | 5 × $15 | $75 |
| Cost of goods | 5 × $8 | $40 |
| Gross profit | $75 − $40 | $35 |
| Realized margin | $35 ÷ $75 | 46.7% |
| Remaining stock value | 35 × $8 | $280 |
The $35 gross profit describes this sale’s revenue less its recorded goods cost. It does not deduct rent, wages, or other operating expenses.
Compare reports on the same basis
If the actual sale price was discounted to $12, the recorded revenue would be $60 and gross profit $20. The current list price could still be $15. That is why list margin and realized sales margin may differ.
Before comparing periods, check the date range, recorded sale quantities, actual prices, and costs saved with the sales. Use History to investigate unexpected entries.