Define forward buying and provide an example.
Understand the Problem
The question asks for a definition of "forward buying" and requests an example to illustrate the concept. Forward buying is a purchasing strategy where companies buy more of a product than needed in the short term to take advantage of temporary price discounts or anticipated price increases. This helps to lower the cost of goods sold but may increase inventory holding costs.
Answer
Forward buying is purchasing more than needed or purchasing for future delivery to capitalize on discounts or anticipated price increases.
Forward buying involves purchasing goods or commodities in larger quantities than immediately needed, or purchasing at a set price today with delivery in the future. This is often done to take advantage of current discounts, anticipated price increases, or to secure supply.
Answer for screen readers
Forward buying involves purchasing goods or commodities in larger quantities than immediately needed, or purchasing at a set price today with delivery in the future. This is often done to take advantage of current discounts, anticipated price increases, or to secure supply.
More Information
Forward buying is a strategy used to mitigate risks associated with price volatility or supply shortages.
Tips
A common mistake is to confuse forward buying with futures contracts, although related, forward buying usually implies intent to take delivery
Sources
- Buying Forward Trading: Definition, Meaning & Example - Upstox - upstox.com
- FORWARD BUYING definition in American English - Collins Dictionary - collinsdictionary.com
- Buying Forward and Inflation - New Horizon - newhorizon.ai
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