First we'll look at assets, specifically faux assets. From there, we'll look at some liabilities. One of the first lines we find under current assets is inventory. For those already familiar with the Fool, you should remember that we believe inventory is a liability masquerading as an asset. With retailers, this is especially true.
Inventory represents the merchandise the company has available for sale.
For most retailers, we're talking about finished goods sitting in warehouses or on store shelves. The reason we consider this a liability is because of inventory risk. Essentially, inventory risk is the risk that the value of the inventory will decline before it's sold. The problem that many retailers face is that their goods are perishable, either literally in the sense of food spoiling, or theoretically in the sense that items could go out of fashion. It depends on the type of retailer.