The Stock-Out Avoidance Motive for Holding Inventories Suggests That

question 11

Multiple Choice

The stock-out avoidance motive for holding inventories suggests that:

• A) firms hold inventories in order to produce more output.
• B) when sales are low, firms produce more than they sell and put the extra goods in inventories.
• C) firms hold inventories to avoid losing sales.
• D) when a product is only partly completed, its components are counted as part of the firm's inventory.

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Definitions:

Monthly Sales

The total revenue or units sold by a company in one calendar month.

Degree of Operating Leverage

A financial indicator that evaluates how changes in sales volume impact a company's operating earnings.

Break-even

The juncture where overall expenses match total income, indicating neither profit nor loss is present.

Unit Sales

The total quantity of an item or product sold.