Question at position 6 Inventory is an asset that allows a company to support manufacturing operations and fill customer orders immediately, but too much inventory ties up capital and can become a significant liability.TrueFalse

Question

Question at position 6 Inventory is an asset that allows a company to support manufacturing operations and fill customer orders immediately, but too much inventory ties up capital and can become a significant liability.TrueFalse

BlackTom AI · Accepted Answer

Question restatement: The statement posits that inventory is an asset that supports manufacturing operations and immediate customer orders, but holding too much inventory ties up capital and can become a significant liability. The answer choices are: True and False.
Option 1: True. This aligns with fundamental definitions in accounting and operations management. Inventory is indeed an asset on the balance sheet and is used to support production and fulfill customer orders quickly. However, while it provides benefits, excessive inventory ties up cash (working capital), increases carrying costs (storage, insurance, handling), and raises risk of obsolescence or spoilage. These factors collectively explain why large or unneeded stock can become a liability rather than a pure asset.
Option 2: False. Saying the statement is false would imply that inventory either does not support operations, or that overstocking does not tie up capital or create liabilities. This contradicts standard financial and operations reasoning: inventory directly supports operations and sales, but excessive levels do tie up capital and elevate risk. The claim that inventory can become a liability is widely recognized, so labeling the entire statement as false ignores these well-established effects.
In summary, the first option correctly describes the dual nature of inventory as an asset that supports operations while also posing risks if kept in excess. The second option incorrectly denies these well-supported aspects, overlooking the capital implications and potential liabilities associated with overstock.

Question at position 6 Inventory is an asset that allows a company to support manufacturing operations and fill customer orders immediately, but too much inventory ties up capital and can become a significant liability.TrueFalse

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