Why do companies try to keep inventory low?
A) It keeps production stable.
B) It keeps the raw materials market balanced.
C) The lower the inventory, the more flexibility the company is.
D) It keeps the suppliers in competition with one another.
E) Money that is not tied up with inventory can be used for other purposes (increased liquidity).

Question

Quizplus · Accepted Answer

When companies keep inventory low, they are able to use the money that would have been tied up in inventory for other purposes, which increases their liquidity. This can help with cash flow and enable the company to invest in other areas of the business.

Why Do Companies Try to Keep Inventory Low