Inventory levels increase by 10% at your company during the fourth quarter.Based on this increase,which of the following statements is true?
A)This is always good news because inventories are an asset to the company.
B)This could be good news if the company is ordering more goods because sales appear to be rising.
C)This could be bad news if the company is ordering more goods because unit costs are falling.
D)This is always bad news because higher inventories mean higher costs.

Question

Quizplus · Accepted Answer

An increase in inventory levels during the fourth quarter can be a positive sign if it is due to increased orders and rising sales. This indicates that the company is anticipating strong demand and is preparing accordingly. However, an increase in inventory levels could also be a negative sign if it is due to falling unit costs and overproduction, which could result in excess inventory and increased storage costs. Therefore, statement B is the only one that acknowledges the potential positive and negative implications of an increase in inventory levels.

Inventory Levels Increase by 10% at Your Company During the Fourth