Audit and Assurance Practice Exam

An effective inventory strategy in the context of introducing a new product typically leads to reduced days' sales in inventory. This indicates a more efficient turnover of inventory, meaning that the company is able to sell its products quicker, which is particularly important for new products that may face uncertainty in demand. By optimizing inventory levels and ensuring that the right amount of product is available when needed, the company can reduce the time that inventory sits unsold, thereby improving cash flow and reducing the risk of stock obsolescence.

In this scenario, effective inventory management directly relates to cost efficiency and customer satisfaction, as it helps meet consumer demand more promptly. By lowering the days' sales in inventory, the company can effectively balance its supply chain and respond agilely to market changes, which is critical when launching a new product. This approach helps in sustaining the momentum of new product adoption by making sure products are readily available without resulting in excess stock that could increase carrying costs.