You review a company's financial statements and it reveals that its inventory days figure is erratic, ranging from 20 days to 75 days. The company's inventory is not likely to become obsolete and is not perishable. You are aware that its raw material prices can fluctuate significantly. How would you evaluate the pattern in its inventory days? 

A) The business likely purchases bulk inventory when prices are low to minimize costs. Given that inventory will not perish or become obsolete, this shows good planning and policy by management. 

B) Although some fluctuation would be expected given the price variations, you would expect the range of inventory days to be between 20 and 40 days to avoid too much cash being tide up in inventory 

C) it is a concern because you would expect inventory days to be constantly high, indicating that they carry a good reserve to avoid disruption being caused by supply issues

Answer rating: 100% (QA)

Based on the information provided option B seems to be the most reasonable evaluation of the pattern ... View the full answer