High inventory levels could cause a business to be profitable but not have adequate cash flow.

Question

Quizplus · Accepted Answer

High inventory levels mean more money has been invested in purchasing goods for resale or production, which can lead to increased profitability. However, having a lot of inventory tied up can limit the cash available for other business needs, such as paying bills or making investments, which can negatively affect cash flow.

High Inventory Levels Could Cause a Business to Be Profitable