Managing current assets involves a trade-off between two types of costs. These costs are:
A) carrying costs and opportunity costs.
B) shortage costs and cash-out costs.
C) cash-out costs and stock-out costs.
D) carrying costs and shortage costs.

Question

Quizplus · Accepted Answer

Carrying costs are the costs associated with holding or "carrying" inventory, such as storage, insurance, and spoilage. Shortage costs, on the other hand, are costs that occur when inventory is not sufficient to meet demand, leading to lost sales or customer dissatisfaction. Managing current assets, particularly inventory, involves balancing these two types of costs to optimize overall financial performance.

Managing Current Assets Involves a Trade-Off Between Two Types of Costs