Chapter 6, Problem 1Q

To determine

Inventory: It refers to the total stock of such goods or items which are held by the business organizations with the purpose of sale.

To explain: The given statement is true or not.

Answer to Problem 1Q

This given statement is true.

Explanation of Solution

• The effective management of inventory includes the prevention of goods wastage (leakage, spoil) which can be measured in the terms of money.
• The major part of working capital is always invested in the inventory. So, effective management of inventory will also reduce the requirement of amount for the working capital.
• Hence, effective management of inventory indirectly increase the amount of profit of the business organization.

Conclusion

“The key to successful business operations is effective inventory management.” is a true statement.