What is an advantage of maintaining a low inventory?

Maintaining a low inventory can indeed maximize profits, which is the reason this option stands out as the correct answer. Keeping lower levels of inventory often reduces the costs associated with storage, such as rent, utilities, and insurance, while minimizing losses from inventory that may become obsolete or spoil. Additionally, with lower capital tied up in unsold goods, businesses have greater liquidity to invest in other opportunities, improving overall profitability.

Moreover, a low inventory system can streamline operations, reduce waste, and enhance cash flow management. By only purchasing or producing inventory as needed, a business can respond more swiftly to market demands, potentially increasing customer satisfaction and maximizing revenue opportunities.

Other options do not align with the benefits of maintaining low inventory. Increased storage costs imply a burden rather than a benefit, and higher employee turnover could stem from a stressful inventory management system, which is typically counterproductive. The need for frequent replenishment might suggest inefficiencies in supply chain management, making it less desirable than optimizing inventory levels to align closely with market demand.