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𝗧𝗿𝘂𝗲: The ABC inventory management approach categorizes inventory into three classes (A, B, and C) based on their value and significance to the business. Typically, a small percentage of items (Class A) will make up a large percentage of the total inventory value, justifying focused management efforts on these high-value items.
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𝗙𝗮𝗹𝘀𝗲: An optimal credit policy aims to balance total costs related to managing cash, specifically minimizing carrying costs and opportunity costs. The goal is to find a policy that maximizes revenue and cash flow, not the total costs of managing cash.
Write "𝗧𝗿𝘂𝗲"if t he statement is correct, writte "𝗙𝗮𝗹𝘀𝗲" if the statement is incorrect with brief explanations.
1. The rationale behind ABC inventory management approach is that a small portion of inventory in terms of quantity might represent at a large portion in the terms of inventory value.
2. An optimal credit policy is the one that maximize the total costs of managing cash, namely carrying cost and opportunity cost
1 answer