There should be systematic approach to inventory management which must attempt to balance out the expected cost & benefits of maintaining inventories. Out of different assets being maintained by the firm , inventory is one which requires to be monitored & managed not in terms of money value but also in terms of number of physical unit. The financial manager must see that the inventory does not become unnecessarily large when compared with the required ;and for this close control over the size & composition of inventories must be maintained.

Various technique has been suggested to deal with these problems. Some of these has been discussed as follows:

• ABC Analysis
• The Economic Order Quantity Model