Safety stock is referred to as the:
A)excess amounts of fixed assets kept on hand to meet unexpected shocks in demand.
B)excess amounts of accruals used to fund short-term demands for cash.
C)excess amounts of a current asset kept on hand to meet unexpected shocks in demand.
D)none of these.

Question

Quizplus · Accepted Answer

Safety stock refers to the excess inventory of a particular product that is kept on hand to meet the demand that arises due to unexpected shocks in demand. It acts as a buffer and ensures that customer orders can be fulfilled even if the demand for the product increases unexpectedly. Safety stock is a type of current asset, and it is essential for companies to maintain an appropriate level of safety stock to avoid stockouts and maintain customer satisfaction. Therefore, option C is the correct answer. Option A refers to excess amounts of fixed assets, and option B refers to accruals used to fund short-term demands for cash, which is not related to safety stock.

Safety Stock Is Referred to as The