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Ratio

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Ratio

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • February 23, 2024 at 10:44 am #700952
    miracle657
    Participant
    • Topics: 65
    • Replies: 26
    • ☆☆

    Which of the following is likely to increase the inventory holding period?
    A) Building up inventory levels in preparation of a sales and marketing campaign later in the year
    B) Scrapping of old and obsolete items of inventory
    C) Only ordering goods from a reliable supplier upon receipt of a customer order
    D) Implementation of effective goods requisitioning and ordering policies
    Dear tutor, correct answer is A. But i didn’t understand. Could you please explain all choices (A,B,C,D).Thanks in advance

    February 23, 2024 at 6:56 pm #700981
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54761
    • ☆☆☆☆☆

    The holding period is measuring how long the inventory will last based on the current level of sales.

    A is correct because although the future sales are going to be higher, the current sales are not changed but the inventory is a lot higher.

    B means there will be less inventory, and so the holding period is not going to be higher.
    C and D neither of them are going to change the level of inventory.

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