The cost of carrying inventory is used to help companies determine how much profit can be made on current inventory. The cost is what a business will incur over a certain period of time, to hold and store its inventory. The carrying cost of inventory is often described as a percentage of the inventory value. This percentage can include taxes, employee costs, depreciation, insurance, and the cost of insuring and replacing items. There are four main components to the carrying cost of inventory; capital cost, storage space cost, inventory service cost, and inventory risk cost.