1. we are asked that:

(a) The analysis of inventory policy is analogous to the analysis of credit policy. Propose a measure to analyze inventory policy that is analogous to the aging of accounts receivable.

(b) What are the principal implications to the financial manager of ordering costs, storage costs, and cost of capital as they relate to inventory?

(c) Explain how efficient inventory management affects the liquidity and profitability of the firm.

(d) How can the firm reduce its investment in inventories? What costs might the firm incur from a policy of very low inventory investment?

(e) Explain how a large seasonal demand complicates inventory management and production scheduling.

(f) Do inventories represent an investment in the same sense as fixed assets?

(g) Should the required rate of return for investment in inventories of raw materials be the same as that for finished goods?