Increased Molybdenum inventory by 5 million pounds
Where does this inventory show up in the financial results? Any assistance appreciated.
The key operating measures that management focuses on in operating our business are production, cash costs per pound produced and capital expenditures. We continually review our operating strategy as commodity market conditions change.
We increased molybdenum inventory throughout 2012 by approximately 5 million pounds as our production volume exceeded our sales contract volumes. This excess production is expected to be sold over the course of 2013.
Inventory build up, increased the inventory balance on the balance sheet. Since it doesn't fall out of the sky, it requires cash to manufacture inventory, and use/sources of cash flow are found in the statement of cash flows - operating section. See changes in working capital footnote.
Nope, not a trick question. I am not an accountant and am looking at this situation from a basic view of:
The company produces 5 billion pounds of moly during 2012 which they do not sell. They then cost out the 5 billion pounds. Now, the 5 B could have been sold for an average value of $13.48 per pound. That is approx. $65 million in additional revenue that could have been achieved in 2012 if the moly was sold.
Am I missing something??? Not a trick question, just do not understand the trickiness of accounting principles. .