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Inventories play an important part in any organization and maintain its position at the time of financial crisis. And this stock (inventory) can be increased only by the continuous investments and continual working of the business organization.And when this investment stops, the stock ceases to grow and remains constant till the new investment is introduced in the company. And that is myhomeworkhelp.com feel it important to discuss stock build up with the stock buildup and its impact homework help.
Process of stock buildup
The entire process of capital stock as per our researched stock buildup and its impact assignment help is built by investing and gaining money from investment to use in the production can be further divided into 5 steps,
- The first and foremost step is the decision of the firm to enlarge its stock of capital.
- Following their decision, the firm tries to raise funds for their further expansion either by asking some external sources like banks,etc. or using their own finances, by cutting down the profits of the owners.
- Finally, the action of the entire decision comes into the picture. In this step, the firm uses up the finances to build up factories, warehouses,etc
- After the action step of the investment is over, the firm will end up with an even larger stock of capital as a result of their smart investment.
- Finally, the firm uses up the capital earned to either expand their production or reduce their costs. Finally, at this step, the firm starts earning are turn on their investments (ROI).
Impact of stock buildup
Though as mentioned earlier, stock buildup can prove to be advantageous in increasing the capital stock of the company, but at the same time, there are a lot of negative impacts too. For this detailed information is provided in our stock buildup and its impact homework help.
- Holding costs
The structures like warehouses, refrigerators, equipment or other supplies all require maintenance costs. And such inventory that requires maintenance becomes a liability in the long run.
- Interest rates
When an inventory is allowed to be build up without getting sold, then there is no revenue from such inventory. And the interest that could have earned on that money cannot be earned. Plus if the inventory is rented, the interest rate accumulates to be high.
- Storage space
The entire stock inventory that is simply sitting in the warehouse occupies storage space, thus leaving lesser place for the new products.This leads to company going for more warehouses which would increase the cost.
Product obsolescence is one of the biggest concerns of companies involved with technical equipment, food products, etc.And stock buildup leads to product getting obsolete and their value getting lower as they are no more desired by the customers.
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