Question

Assertion (A): Larger the lead time, larger is the quantity of material required to be stored, and larger shall be the amount of working capital required.

Reason (R): If the raw material do not have a record of uninterrupted availability, higher stock levels may be required.

Choose the correct alternative from the alternatives given below:

Options

• Assertion (A) is false, and Reason (R) is true.

• Both Assertion (A) and Reason (R) are false.

• Assertion (A) is true, and Reason (R) is false.

• Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Answer 1

Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:

A business needs to keep more stock on hand when it takes longer to get stock or when the supply isn’t always clear. This makes it clear that a business needs more working capital.