Help with business question

timer Asked: Nov 4th, 2015
account_balance_wallet $5

Question Description

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

Tutor Answer

School: New York University

Thank you for the opportunity to help you with your question!

Inventory holding may be decided 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.


  • 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 
  • By holding inventory,seasonal and cyclical demand are catered for. This aid in vast production and satisfied consumer markets

Please let me know if you need any clarification. I'm always happy to answer your questions.

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