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CIPS L5M10 Exam - Topic 2 Question 2 Discussion

Actual exam question for CIPS's L5M10 exam

Question #: 2
Topic #: 2

[All L5M10 Questions]

In an organisation that has implemented the Theory of Constraint in manufacturing, which of the following is true?

AInventory is seen as a liability

BInventory is seen as an asset

CInventory is not held

DInventory is held by the customer

Show Suggested Answer

Suggested Answer: A

Comprehensive and Detailed Explanation From Exact Extract:

Within TOC, inventory is treated as a liability (it ties up cash and can hide flow problems), contrasting with traditional accounting that books inventory as an asset. (CIPS L5M10 Study Guide, pp. 141--142)

by Sylvie at Nov 19, 2025, 10:22 AM

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Laurel

3 months ago

D is interesting. Customers holding inventory shifts risk.

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Gerri

3 months ago

C could be true too. Just-in-time reduces holding costs.

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Elroy

3 months ago

But what about B? Some see inventory as a safety net.

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Nicolette

3 months ago

I agree, A makes sense. Less inventory, more efficiency.

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Truman

4 months ago

I think A is correct. Inventory can slow down production.

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Makeda

4 months ago

I always thought customers held the inventory, but I guess not!

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Carri

4 months ago

B is definitely not true in this context.

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Floyd

5 months ago

Wait, are we sure about that? I thought inventory could be an asset too.

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Brandon

5 months ago

Totally agree with that! Less inventory, more efficiency.

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Mozell

5 months ago

Haha, imagine if the customer had to store all the inventory. The poor folks would be drowning in products!

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Rima

5 months ago

D? Really? Why would the customer hold the inventory in a Theory of Constraint system? That makes no sense.

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Jodi

5 months ago

I thought inventory was always an asset. This Theory of Constraint thing is really messing with my understanding of accounting.

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Joni

5 months ago

Option A is correct. Inventory is seen as a liability in a Theory of Constraint manufacturing environment.

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Andree

6 months ago

I’m leaning towards option A, but I recall something about customers holding inventory too. This is tricky!

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Viva

6 months ago

I feel like the Theory of Constraints emphasizes minimizing inventory, so maybe it's not held at all?

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Tracey

6 months ago

I remember a practice question where inventory was described as an asset, but that might have been in a different context.

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Chu

6 months ago

Hmm, I'm a bit confused on this one. I know the Theory of Constraints is about improving efficiency, but I'm not sure how that relates to inventory specifically. I'll have to review my notes and try to reason through this.

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Blair

6 months ago

I remember learning about the Theory of Constraints in class, and I believe the goal is to reduce inventory as much as possible. So I think the correct answer is C - inventory is not held.

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Sheron

6 months ago

Okay, let me see. If the Theory of Constraints is all about identifying and managing the constraints, then I'd say inventory is probably seen as an asset that can be used to buffer the constraint. I'll go with option B.

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Martha

7 months ago

A) Inventory is seen as a liability.

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Tyisha

7 months ago

I think inventory is considered a liability in the Theory of Constraints, but I'm not completely sure.

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Christene

7 months ago

C is the way to go. No inventory? Sign me up! That's the dream, right?

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Karan

7 months ago

Overall, I lean towards A. Less waste, better flow.

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Adaline

8 months ago

Hmm, I'm a bit unsure about this one. I know the Theory of Constraints is about improving flow, but I'm not sure how that translates to inventory management. I'll have to think this through carefully.

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Hui

8 months ago

I think the Theory of Constraints focuses on identifying and managing the constraints in a system, so I'd guess that inventory is seen as a liability that should be minimized.

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Fanny

2 months ago

True, focus on the constraints first!

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Julianna

2 months ago

Only if it doesn't create bottlenecks.

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Haydee

3 months ago

But isn't some inventory necessary?

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Stefania

3 months ago

Definitely, minimizing it is key.

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Fredric

7 months ago

I agree, inventory can slow down production.

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