A weeks of supply measure that is high relative to industry standards may indicate:
A) Too much inventory is being held
B) Too much cash invested in inventory
C) Greater chance of a stock-out
D) a and b
E) All of the above

Question

Quizplus · Accepted Answer

A high weeks of supply measure means that the company is holding onto inventory longer than its competitors, which can indicate that they have either purchased too much inventory or not sold enough inventory. This could lead to a situation of excess inventory that ties up cash and could eventually result in the need for markdowns or write-offs. In addition, if demand suddenly increases, there may not be enough inventory to meet customer needs, resulting in stock-outs.

A Weeks of Supply Measure That Is High Relative to Industry