Question

1. Indicate by a (+), (-), or (0) whether each of the following events would probably cause average annual inventory holdings to rise, fall, or be affected in an indeterminate manner. Also provide an explanation for each event and the affects. (5 pts)

                              

a. Our suppliers switch from delivering by train to air freight.                 

b. We change from producing just-in-time to meet seasonal sales to steady, year-round production.

c. Competition in the markets in which we sell increases.       

d. The rate of general inflation increases.           

e. Interest rates rise; other things are constant.

Answer 1

a. Suppliers switch from delivering by train to air freight

Here Cost increases but definetly inventory movement will be fast

average inventory will be up So +

b. While producing year around the supply will be met all the time, so the growth is foreseen

average inventory will be up

it is +

c. Competition in market will definetly impact sales, when sales is down the growth is also down

average inventory will be down

so it is -

d. Rate of inflation increases will impact inventory cost

we can see examples if crude goes down the growth of the company or share price increases

average inventory will be down

so if inflation goes up it is (-)

e. if rising interest rates slow payments, then Accounts Receivables increase

So Accounts Payables increase.

But here the synario is mentioned, others is constant

Inventory should remain same so it is 0