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How does lost inventory or duplicate inventory affect capital management

How does lost inventory or duplicate inventory affect capital management

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Answer #1

Inventory is the part of working capital. Correct inventory is must for correct valuation of working capital because it is vital to ensure that company has enough money to meet it's short term obligations.

Having incorrect inventory by means of duplicity of inventory or inventory lost will under report or over report the inventory. Therefore, working capital estimation will be incorrect. Hence, it will lead to hamper capital management.

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