Page 151 - FM Integrated WorkBook STUDENT 2018-19
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Working capital management – Inventory control
The objectives of inventory management
1.1 Overview
Inventory is a major investment for many companies. Manufacturing companies can
easily carry inventory equivalent to between 50% and 100% of the revenue of the
business. It is therefore essential to reduce the levels of inventory held to the
necessary minimum.
Liquidity – Reducing
inventory to the
lowest possible
amount to minimise
the level of funding
needed
Profitability –
Ensuring that
sufficient inventory is
held so that it does
not run out and
disrupt business.
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