Evaluate the profitability and sales, Financial Management

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 a) Stockpiles refers to the accumulated (or excess level of) supply Ford motor vehicles, i.e. too much production given the level of demand. The purpose is to prevent possible shortages in supplies which could harm profitability and sales (although in Ford's case stockpiling is the result of poor stock control).

b) Poor stock control can mean either under-stocking or excessive stockpiling (or even a stock-out). There are drawbacks to both, as outline below:

Over-stocking

Under-stocking

Reduces Ford's liquidity position

Disgruntled and dissatisfied customers

Likely to hinder working capital since finance is tied up in stockpiles

Customers might switch to rival manufacturers' brands

Higher storage costs, e.g. insurance, maintenance and security

Compensation for failure to meet promised delivery dates

Possibility of some stock being damaged or even becoming obsolete (unlikely for cars, but their value could still depreciate)

Higher unit costs due to idle resources (which cost money but do not generate revenue)

 


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