Which of the Following Situations Is an Example of Inventory

question 287

Multiple Choice

Which of the following situations is an example of inventory being held as a way to balance supply and demand?

• A) A manufacturer holds inventory of key components to maintain a level production schedule.
• B) A manufacturer of seasonal products builds finished-goods inventory before the peak selling period.
• C) A distributor maintains safety stock of slow-moving items at a central distribution center.
• D) A retailer stocks a variety of sizes and colors of a fast-selling item to avoid losing sales.

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Definitions:

Reinvestment

The process of using dividends, interest, or any other form of income generated by an investment to purchase additional shares or units of that investment.

IRR Method

The process of estimating the rate of return on an investment by setting the net present value of all cash flows to zero, to assess its profitability.

MIRR

Modified Internal Rate of Return, a financial measure used to assess the attractiveness of investments by accounting for the cost of borrowing and reinvestment rates.

Cash Flows

The aggregate sum of money entering and exiting a business, notably affecting its cash flow.