Asked by Manpreet Aulakh on May 10, 2024
Verified
A rapid build-up of inventories normally requires additional financing,unless the increase is matched by an equally large decrease in some other asset.
Inventories
Stock of goods or materials held by a company, intended for sale or used in production processes.
- Discern the influences that dictate the call for additional financial resources from outside entities.
Verified Answer
BI
Bushra ImranMay 12, 2024
Final Answer :
True
Explanation :
When inventories increase rapidly, it means that the company is producing or buying more goods than it is selling, which ties up cash. Therefore, the company needs additional financing to pay for the increased inventory. However, if there is a corresponding decrease in another asset (such as accounts receivable), that can offset the need for additional financing.
Learning Objectives
- Discern the influences that dictate the call for additional financial resources from outside entities.
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