Annual Holding Cost (AHC) is an essential term in the business world that reflects the ongoing cost associated with keeping or holding inventory in a company’s warehouses. This cost includes storage, insurance, spoilage, and other related costs that might be accrued over the course of the year. AHC also takes into consideration the opportunity cost of not investing those same funds in alternative areas like marketing or research and development. As such, companies must keep a close eye on their AHC as it can quickly become a major expense if not managed properly.