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No economy can survive without the development and growth of the small and medium size enterprises. For development of small size businesses, inventory management plays important role. In this study, the inventory management of small businesses in the Bangladesh is assessed. We tested the influence of the effect of inventory value on profitability of small businesses for a period of 10 years. The analysis is based on the regression analysis framework. The results show that there is positive and significant relationship between inventory management of small businesses and the profitability of small businesses in the selected areas of Pakistan. We conclude that for small businesses, effective inventory management is important for generating higher profitability.