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Production, marketing and finance managers disagree about inventory. What does the financial manager want?
AThe largest possible stock of raw materials
BThe largest possible stock of finished goods
CThe least inventory that does not harm output
DThe same inventory level as the year before
Answer & Solution
Correct answer: C. The least inventory that does not harm output
1. Production managers want plenty of raw materials on hand to avoid production delays.
2. Marketing managers want plenty of finished goods so customer orders can be filled quickly.
3. Financial managers want the least inventory possible without harming production efficiency or sales, because inventory ties up funds.
4. The cost of inventory is more than its purchase price: ordering, handling, storage, interest and insurance all add to it.
5. Balancing these conflicting goals is why finance has to work closely with production and marketing.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.2 How Organizations Use Funds_
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