Which of the following costs will tend to increase if a firm switches to a restrictive short-term financial policy from a flexible short-term policy?
I.Lost sales due to out-of-stock items
II.Inventory warehousing costs
III.Cash-outs
IV.Total annual order costs

Question

Quizplus · Accepted Answer

A restrictive short-term financial policy typically reduces inventory levels and cash holdings, leading to increased lost sales due to stockouts (I) and potentially higher cash-outs (III) due to less liquidity. It also increases the frequency of orders, raising total annual order costs (IV).

Which of the Following Costs Will Tend to Increase If