Explain the risks and benefits associated with holding inventory
Expert Answer
Risk associated with holding inventory;
Followings are the main risk associated with holding inventory;
1. Blockage of cash;
As we know that purcahse of inventory requires cash, so holding more and more inventory means blockage of more and more cash. In other words we can say that holding more inventory will lead to blockage of cash funds unnecessarily.
2. Risk of obsolescence;
Market is dynamic in nature and demands of the customers changes time to time. So if a firm holds excess inventory at any time then there will be a higher risk
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