Everything else held constant, will an increase in the amount of inventory on hand increase or decrease the firm's profitability?
A) Decrease the profitability.
B) Increase the profitability.
C) It could either increase or decrease the profitability depending on net profit margins.
D) It could either increase or decrease the profitability depending on the debt ratio.

Question

Quizplus · Accepted Answer

Holding more inventory typically increases a firm's holding costs, such as storage, insurance, and potential obsolescence, which can decrease profitability.

Everything Else Held Constant, Will an Increase in the Amount