BUISENESS MANAGEMENT
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the cost associated with giving up the use of money tied up in inventory.
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the cost of the interest you pay to borrow money to purchase inventory.
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the cost associated with renting or buying the space needed to store the inventory.
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the cost associated with the loss of inventory items that are broken, damaged, spoiled, or stolen.
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Detailed explanation-1: -Inventory financing is credit obtained by businesses to pay for products that aren’t intended for immediate sale. Financing is collateralized by the inventory it is used to purchase. Inventory financing is often used by smaller privately-owned businesses that don’t have access to other options.
Detailed explanation-2: -Financing cost (FC), also known as the cost of finances (COF), is the cost, interest, and other charges involved in the borrowing of money to build or purchase assets. This can range from the cost it takes to finance a mortgage on a house, to finance a car loan through a bank, or to finance a student loan.
Detailed explanation-3: -An Example Inventory financing is part of the production cycle of buying, making, and selling. When a car is sold, the dealer can pay off the portion of the loan related to that car, or purchase more inventory to sell.
Detailed explanation-4: -Financing through Trade Credit is the appropriate one to finance purchase of inventories. Since funds required for purchase of inventories are for short term usually for three to six months. In trade credit, manufacturer is granted credit from supplier for raw materials and goods.