Question

If inventory levels are rising but the sales are not, what might this indicate and why might this be a concern? Discuss in 80–100 words.

Answer 1

The increasing inventory always and decrease in sales, always a very big concern, which should not be neglected. The company expected that the sales will increase and piled up the inventory, expecting a higher demand, but there was low or no demand, so inventory got piled up. The inventory days will increase and already a lot of cost is incurred. The company may have to lower it price and clear of the stock . Some times the raw material company, expecting the sales of the final product is high, may pile up its raw material inventory, which will pose a serious problem to the raw material company.