The general manager of a steel mill is pretty sure that the demand for and price of steel will be increasing sharply within the next six months due to a sudden boom in the housing market.If he increases current production and inventories corresponding to his belief,his action would be indicative of the _____________ motive for holding inventory.

Question

Quizplus · Accepted Answer

The general manager's decision to increase production and inventories based on his belief of a sharp increase in demand and price for steel in the next six months indicates speculative motive for holding inventory. This is because the decision is based on speculation or anticipation of future price increases, rather than a precautionary measure to mitigate risks or ensuring smooth operations (precautionary motive) or meeting current demand and supply requirements (transaction motive). The just-in-time motive involves holding minimal inventory to reduce waste and improve efficiency, which is not applicable in this scenario.

The General Manager of a Steel Mill Is Pretty Sure