Which of the Following Would Cause Average Inventory Holdings to Decrease

question 19

Multiple Choice

Which of the following would cause average inventory holdings to decrease, other things held constant?

• A) The purchase price of inventory items decreases by 50 percent.
• B) The carrying price of an item decreases (as a percent of purchase price).
• C) The sales forecast is revised downward by 10 percent.
• D) Interest rates fall.
• E) Fixed order costs double.

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Definitions:

Sales

The activity or process of selling products or services, which involves transactions between buyers and sellers.

Total Assets

The sum of all resources owned by an entity, including both current and fixed assets, representing the total value of what it owns.

Liquidity

The ease with which assets can be converted into cash without significantly affecting their value, often essential for meeting short-term financial obligations.

Leverage

The use of borrowed capital or financial instruments to increase the potential return of an investment, or in business, the use of various techniques to maximize outcomes.