Credit and Inventory Management

How many types of inventory do businesses have and how many stages of a production process do they have?

• 3 types of inventory and 3 stages of a production process

• 2 types of inventory and 3 stages of a production process

• 3 types of inventory and 2 stages of a production process

• 4 types of inventory and 3 stages of a production process

What are the components of credit policy?

• Terms of sale

• Collection policy

• Credit analysis

• All of the above

Which is not the deciding factor in the length of the credit period?

• Perishability and collateral value

• Inflation growth rate

• Credit risk

• Competition

Which of the following is NOT a component of the inventory turnover ratio?

• Cost of goods sold

• Average inventory

• Days sales outstanding

• Account payable

The primary goal of inventory management is to:

• Minimize carrying costs

• Maximize inventory levels

• Ensure customer satisfaction

• Increase sales revenue

Which of the following is NOT a carrying cost of inventory?

• Insurance

• Warehousing

• Obsolescence

• Transportation

Which inventory management method is the most commonly used?

• FIFO (First-In, First-Out)

• LIFO (Last-In, First-Out)

• EOQ (Economic Order Quantiny)

• ABC (Activity-Based Costing)

What is the economic order quantity (EOQ) ?

• The optimal quantity of inventory to order to minimize total inventory costs

• The maximum quantity of inventory that can be stored in a warehouse

• The minimum quantity of inventory that must be kept on hand to meet customer demand

• The average quantity of inventory that is sold each month

Which of the following is NOT a trade credit policy?

• Cash discount

• Credit period

• Net 30

• 2/10, net30

What is the purpose of a safety stock level?

• To define the reorder point for inventory

• To minimize the number of inventory transactions
  

• To act as a buffer against unexpected demand fluctuations

• To ensure efficient use of warehouse space