Basic purpose of this term paper is to discuss and analysis on Inventories. Inventories are asset. How a business classifies its inventory will depend on whether the firm can be a merchandiser or a production. In a merchandising company inventor involves many different items. For instance, in a grocery retailer, canned goods, dairy products, meats, and produce are just some of the inventory items available. Manufactures usually classify supply into three categories: Finished goods, Work in process and Raw materials.