Noncash working capital needs in an existing business, product line or location

Question

Noncash working capital needs in an existing business, product line or location will tend to ebb and flow with rising or falling demand. Accounts receivable will tend to rise with higher demand, and fall with lower demand, to a significant degree offsetting each other. Inventory must be built as well, and in advance of receivables typically (but not always!) to support higher anticipated demand. What does/can happen when demand falls unexpectedly?

Select one:

a. Inventory stays the same. It is already built.

b. Inventory will keep rising as long as production is not reduced to align with lower demand.

c. Inventory will decline once production is reduced to a rate lower than end market demand.

d. Both B and C.

Explanation / Answer

After going through the infromation here, there seems to be two option that matches the situation at present that are, option B as well as option C.

So, here, the answer will be option D, both B and C.

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