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demand

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › demand

  • This topic has 2 replies, 2 voices, and was last updated 2 years ago by xyzc.
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  • January 6, 2023 at 1:03 pm #675438
    xyzc
    Participant
    • Topics: 413
    • Replies: 175
    • ☆☆☆☆

    Why is an increase in demand for products not a possible reason why a company’s inventory holding period increases from one year to the next

    January 8, 2023 at 7:46 pm #675521
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7198
    • ☆☆☆☆☆

    Hi,

    If there is an increase in demand then the goods are being sold more quickly and so we are not holding the inventory for as long as previously, and therefore this decreases the inventory holding period.

    Thanks

    January 28, 2023 at 9:00 am #677501
    xyzc
    Participant
    • Topics: 413
    • Replies: 175
    • ☆☆☆☆

    But if there is an increase in demand, then more inventory is being held to sell in the next year and also to avoid shortage, which increases the inventory holding period. So an increase in demand could be a reason why a company’s inventory holding period increases from one year to the next. So why is the answer that increase in demand could be a reason why a company’s inventory holding period increases from one year to the next incorrect

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