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

Limited Time Offer

25%

Off

Get Premium L5M10 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Floyd

15 hours ago

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

upvoted 0 times

...

Brandon

6 days ago

Totally agree with that! Less inventory, more efficiency.

upvoted 0 times

...

Mozell

11 days ago

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

upvoted 0 times

...

Rima

16 days ago

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

upvoted 0 times

...

Jodi

21 days ago

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

upvoted 0 times

...

Joni

26 days ago

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

upvoted 0 times

...

Andree

1 month ago

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

upvoted 0 times

...

Viva

1 month ago

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

upvoted 0 times

...

Tracey

1 month ago

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

upvoted 0 times

...

Chu

2 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.

upvoted 0 times

...

Blair

2 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.

upvoted 0 times

...

Sheron

2 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.

upvoted 0 times

...

Martha

2 months ago

A) Inventory is seen as a liability.

upvoted 0 times

...

Tyisha

2 months ago

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

upvoted 0 times

...

Christene

3 months ago

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

upvoted 0 times

...

Karan

3 months ago

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

upvoted 0 times

...

Adaline

3 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.

upvoted 0 times

...

Hui

3 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.

upvoted 0 times

Fredric

2 months ago

I agree, inventory can slow down production.

upvoted 0 times

...