True or False Although inventory is viewed as an asset on the balance sheet, holding excessive...

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True or False Although inventory is viewed as an asset on the balance sheet, holding excessive...

True or False

Although inventory is viewed as an asset on the balance sheet, holding excessive amounts of inventory can erode firm value.

business finance

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Answer 1

Answer #1

TRUE

The invntory a firm own today may not be wanted by customers in future as forecast of demand cannot be completely accurate. Also the cash flow increases in the form of rent and insurance. These will lead to a decrease in profits which leads to erosion of firm value.

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