An increase in the firm's inventory balance will normally require additional financing unless the increase is matched by an equally large decrease in some other asset account.

Question

Quizplus · Accepted Answer

An increase in inventory balance means the firm has invested more in inventory, which requires additional financing unless there is a corresponding reduction in another asset account. This is because the increase in inventory represents an outflow of cash that needs to be balanced by an inflow of cash from either operations or external financing.

An Increase in the Firm's Inventory Balance Will Normally Require