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Hey John!
Question :
Which of the following organisations is most likely to benefit from a period of high price inflation?
1)An organisation which has a large number of long-term payables
2)An exporter of goods to a country with relatively low inflation
3)A supplier of goods in a market where consumers are highly price sensitive and substitute imported goods are available
4)A large retailer with a high level of inventory on display and low rate of inventory turnoverThe answer is 1). My question is why is 4) an incorrect option? Doesn’t having a large amount of inventory benefit the retailer when prices rise due to inflation?
I assume you are happy that 1 is true (but if not then do ask again).
As far as 4 is concerned, it might benefit the company but the reason it is not the most likely of the four is that it is not always easy for the company to increase the prices of goods that they charge for goods that are already on display, and when they sell any of them they will need to replace the goods in their inventory and that will cost them more.
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