What are the reasons for holding inventories?

1.How might each of the following affect the level of inventories held by a business?

 

(a) An increase in the number of production bottlenecks experienced by the business.

(b) A rise in the level of interest rates.

(c) A decision to offer customers a narrower range of products in the future.

(d) A switch of suppliers from an overseas business to a local business.

(e) A deterioration in the quality and reliability of bought-in components.

2.What are the reasons for holding inventories? Are these reasons different from the reasons for

holding cash?

 

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