Which of the following statements is FALSE?
A)Because excessive inventory uses cash, efficient management of inventory increases firm value.
B)If a firm holds too much inventory, stock-outs (the situation when a firm runs out of product)may occur, leading to lost sales.
C)Firms may hold inventory because factors such as 'seasonality in demand' mean that customer purchases do not perfectly match the most efficient production cycle.
D)Inventory helps minimise the risk that the firm will not be able to obtain an input it needs for production.

Question

Quizplus · Accepted Answer

Statement B is false because it inaccurately states that holding too much inventory leads to stock-outs. In reality, stock-outs are more likely to occur when a firm does not hold enough inventory, not when it holds too much.

Which of the Following Statements Is FALSE