A Rapid Build-Up of Inventories Normally Requires Additional Financing, Unless

question 6

True/False

A rapid build-up of inventories normally requires additional financing, unless the increase is matched by an equally large decrease in some other asset.

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Definitions:

Inventory Cost Flow Assumption

An accounting assumption that determines how the cost of inventory is allocated to the cost of goods sold and ending inventory.

Cost of Goods Available

The total cost of goods that are available for sale during a certain period, including goods purchased or manufactured.

Periodic System of Inventory

An inventory system that updates inventory balances at the end of a certain period, involving periodic physical counts.

Inventory Volumes

The total amount of goods a company has available for sale or production at any given time, often measured in units or cost value.