The term “inventory” in manufacturing companies refers to the stockpile of the products a firm is offering for sale and the components that make up the product. The assets which firms store as inventory in anticipation of need are raw materials, work in progress, finished goods, stores and supplies. The last asset, normally form a very minor part of total inventory and does not involve significant investment. The major objective of the research presented here is to provide empirical evidence about the effects of inventory management on the profitability of a sample of small and medium enterprises (SME) in the region of Epirus, in Greece. The study covers a time period from 2002 to 2012. We collected data for 612 enterprises. The results of this research showed that there is statistical significance between profitability, measured through gross margin, and inventories management. Moreover, managers can create profits for their companies by handling correctly inventory turnover ratios and keeping each different component (raw materials, work in process and finished goods).