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Effective inventory management enhances profitability from "summary" of Romancing the Balance Sheet: For Anyone Who Owns, Runs or Manages a Business by Anil Lamba
Inventory is often one of the largest assets on a balance sheet, yet it is also a silent profit killer if not managed properly. The relationship between inventory levels and profitability is intricate and demands attention. When inventory becomes excessive, it ties up capital that could be better utilized elsewhere, leading to cash flow issues and reduced operational flexibility. Conversely, inadequate inventory can result in stockouts, lost sales, and dissatisfied customers, all of which impact the bottom line. To navigate this delicate balance, businesses must adopt a systematic approach to inventory management. Techniques such as just-in-time (JIT) inventory help minimize holding costs while ensuring that products are available when needed. Regular audits and accurate forecasting also play vital roles in maintaining optimal inventory levels. By analyzing sales t...
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