Question

What role does inventory management play in an overall business plan?

Describe one of the methods for managing cash disbursements or cash receipts and how it impacts profitability.

Answer 1

Inventory managment play vital role in business planning. It involves taking decision about the Inventory level, reording level, buffer stock, purchases, closing stock to be maintained etc. If company adopt JIT (Just in time) purchases then they can heavily save on working capital. Therefore Inventory management play vital role managing finances and business plan.

Cash-Basis method- Under this method, When cash is received, a cash receipt is recorded; when cash is disbursed , a cash payment is recorded. However it doesn not show the actual revenue earned it only show what is actually recieved. Therefore it may not be correct parameter to judge the profitabitity