Help with business question

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avan41

Business Finance

Description

How does an organization decide whether or not to hold inventory? Why are these reasons important?

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Explanation & Answer

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Inventory holding may be retorted by a company management in certain situations. For example, the inventory can be held as a hedge against certain factors, external or internal, an opportunity, a precaution, or research and speculative purposes.

Importance

  • By holding inventory, for example, raw materials, a company can meet variation in production demand.
  • it presents economies of scale during procurement seasons
  • It takes advantage of price increase and discount in quantity 

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Anonymous
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