1-The overriding goal of inventory management is to ensure that the firm never s

Question

1-The overriding goal of inventory management is to ensure that the firm never suffers a stock-out, i.e., never runs out of an inventory item.

True

False

2- Not taking cash discounts is costly, and as a result, firms that do not take them are usually those that are performing poorly and have inadequate cash balances.

True

False

3- Determining a firm's optimal investment in working capital and deciding how that investment should be financed are critical to working capital management.

True

False

4- If a firm busy on terms of 2/10 net 30, it should pay as early as possible during the discount period.

True

False

5- Net operating working capital is defined as operating current assets minus operating current liabilities

True

False

           6- Cash is often referred to as a "non-earning" asset. Thus, one goal of cash management is to minimize the amount of cash necessary for conducting a firm's normal business activities.

True

False

Explanation / Answer

Answer to Q 1 is True.

The goal of Inventory management is to ensure that Company never runs out of inventory, stock are purchased at competitive prices etc.

Answer to Q2 is True.

Cash discounts are available when the payment is made at the time of purchase. If the cash discounts are not availed that means firm has inadequate cash balance and it will cost high to the firm.

Answer to Q3 is True.

Working capital is the amount of capital required for day-today functioning. Working capital management is concerned with the amount of working capital required, how to finance the capital etc.

Answer to Q4 is False.

If a buys on term of 2/10 net 30, the firm should make the payment within a period of 10 days to avail the discount of 2%, not as soon as possible.

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