The Future Value of Today’s Inventory

The Future Value of Today’s Inventory

Most law firm managers understand intui­tively that the value of inventory (both WIP and A/R) degrades over time, but by how much and how quickly? The ability to un­derstand and answer these two questions is the first step in preparing a realistic, forward-looking valuation model - one that can iden­tify opportunities and drive action.

To begin to assess the future value of cur­rent inventory, it is important to recognize that there are two different forces diminishing a firm's return on work performed, and both have the same basis: time. In essence the old adage "time is money" is true; as time passes, a firm's inventory becomes less valuable.

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