Most Firms Try Not to Hold More Inventory Than Necessary

question 138

True/False

Most firms try not to hold more inventory than necessary because shrinkage costs generally decrease when a firm's inventory increases.

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Definitions:

Opportunity Cost

The financial implication of not selecting the following best possibility when faced with a decision.

Interest

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, paid by borrowers to lenders.

Savings Account

A deposit account held at a bank or other financial institution providing principal security and a modest interest rate.

Opportunity Cost

The deficit of potential benefits that could be reaped from alternative options when one is picked.