Safety Stocks Are Extra Inventories That Can Be Drawn Down

question 316

True/False

Safety stocks are extra inventories that can be drawn down when actual lead times and/or usage rates are greater than expected.

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Definitions:

Net Working Capital

The difference between a company’s current assets and its current liabilities, indicating the liquidity of the business.

Current Assets

Assets that a company expects to convert into cash within one year or one business cycle, whichever is longer.

Current Liabilities

Short-term financial obligations or debts of a company, typically due within one year.

Change

A generic term indicating the difference in value or condition over time, often used to describe shifts in markets, prices, or operational conditions.