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Give reasons for the following situations in business 1. Operating cycle is shorter in trading business than in manufacturing business. 2. Shelf life has an impact on the inventory. |
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Answer» 1.If one is involved in manufacturing activity, one starts with buying raw materials and packing materials etc. These materials are then converted into the end product. During the time required to convert raw material to the end product, various expenses like wages, rent, salary, utility bill, insurance etc are to be paid. Once the end product is ready, it has to be sold and money received from the customer. 2.Items like vegetables, fruits, flowers and fish are perishable in nature. This calls for special storage conditions and equipment – cold storage, freezers etc. These have financial implications. Similarly, some of the manufactured food or medicinal products have expiry dates – beyond which they are not fit for consumption. This imposes certain constraints on inventory management. |
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