APICS Certified in Logistics, Transportation and Distribution (CLTD) — Question 90

What may be the cause if the value of inventory is greater than the value of the net working capital?

Answer options

• A. Receivables are too high.
• B. Cost of goods sold (COGS) is too high.
• C. Inventory is too high.
• D. High level of obsolescence.

Correct answer: D

Explanation

The correct answer, D, indicates that a high level of obsolescence can lead to a situation where inventory value surpasses net working capital, as outdated items lose value. Options A, B, and C focus on other factors that do not directly explain the specific relationship between inventory and net working capital.