Preparing for competitive examinations such as MCQ( Multiple choice questions) or for Inventory Management related jobs, you must test your knowledge and skills by asking questions on this topic.
In this article, we have enlisted some popular HML analysis-related multiple-choice questions. I hope they will help you increase and test your knowledge.
MCQ and Answers on HML Analysis
1
What is the primary purpose of HML analysis when applied to inventory?
a) To categorize inventory items by their historical selling price
b) To categorize inventory items by their degree of risk
c) To determine the cost of goods sold for each inventory item
d) To identify slow-moving or excess inventory
Answer: B
2
How is inventory categorized in HML analysis?
a) By product category
b) By supplier
c) By degree of risk
d) By unit cost
Answer: C
3
What is the expected return on an inventory item classified as “High Risk” in HML analysis?
a) Low
b) Moderate
c) High
d) Unpredictable
Answer: C
4
What are some of the benefits of using HML analysis when evaluating inventory?
a) Provides a clear and objective method for evaluating inventory risk and potential returns
b) Allows for easy identification of slow-moving or excess inventory
c) Can aid in making decisions about purchasing and production
d) All the above
Answer: D
5
Which of the following is NOT typical of a “High-Growth, Low-Risk” inventory item?
a) High sales growth
b) High gross margin
c) Low liquidity
d) Low inventory turnover
Answer: C
6
How is inventory risk typically defined in HML analysis?
a) The likelihood of the inventory becoming obsolete
b) The likelihood of the inventory not selling
c) The likelihood of the inventory becoming overstocked
d) The likelihood of the inventory experiencing price fluctuations
Answer: B
7
What is the primary goal of the HML analysis when applied to inventory?
a) To predict future demand for inventory items
b) To identify the most profitable inventory items
c) To identify and manage the risk associated with carrying inventory
d) To optimize inventory levels
Answer: C
8
How is the inventory risk level determined in HML analysis?
a) By analyzing historical sales data
b) By reviewing supplier creditworthiness
c) By conducting a financial analysis
d) By reviewing industry trends
Answer: A
9
What are some of the consequences of carrying a lot of high-risk inventory?
a) Reduced ability to respond to changes in demand
b) Increased holding costs
c) Reduced flexibility in pricing strategy
d) All of the above
Answer: D
10
What are some actions that a company can take to reduce the risk associated with its inventory?
a) Increase its inventory turnover
b) Reduce its inventory levels
c) Implement a just-in-time inventory system
d) All of the above
Answer: D
