Inventory cost is a business term that refers to the total cost of obtaining and holding goods for sale or use in producing other goods. It includes the money invested in purchasing inventory items as well as other costs associated with storing, handling, and shipping them. In simpler terms, inventory cost is the amount of money a business has tied up in its products and raw materials, without which it can’t continue operations. Companies must track and manage their inventory cost closely in order to ensure that they are supplying goods at a price that covers their costs and leaves room for profits.