The higher the average cost of a stockout,the more likely a company is going to want to hold some amount of inventory

Question

Quizplus · Accepted Answer

This is because if the cost of a stockout is high, it means that the company is losing out on potential sales and revenue, which can have a negative impact on their business. Holding inventory can help prevent stockouts from happening, thus reducing the risk of lost sales. Therefore, the higher the cost of a stockout, the more likely a company is to hold inventory to prevent it.

The Higher the Average Cost of a Stockout,the More Likely