Just-In-Time Inventory (JIT) Systems

question 75

Multiple Choice

Just-in-time inventory (JIT) systems:

• A) are used only by manufacturing firms.
• B) provide a buffer stock of inventory for a company.
• C) are used to reduce inventory holding costs.
• D) save costs by outsourcing inventory management to other companies.
• E) always keep extra inventory on hand for emergencies.

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Definitions:

Moral Hazard

A condition in which a person can benefit, usually financially, by acting unethically or immorally, i.e., the person is tempted to be less than honest and ethical. An insurance term. A moral hazard exists when executive compensation is heavily based on the market price of the company’s stock.

Arbitrage

The practice of taking advantage of price differences in different markets to make a profit.

Money Markets

Financial markets focused on short-term borrowing and lending with maturities of less than one year, dealing in instruments like Treasury bills and commercial paper.

Short-Term Debt

Borrowings that are due to be paid back within a short period, typically less than one year.