Final answer:
It is true that interest is a component of the holding cost of inventory as it represents the opportunity cost associated with the capital tied up in the inventory.
Step-by-step explanation:
One component of the holding cost of inventory is interest. This statement is true. Holding costs, also known as carrying costs, are the costs associated with storing and maintaining inventory over a certain period. These costs include storage fees, insurance, depreciation, spoilage, and indeed, the cost of capital, which involves interest expenses. When a business holds inventory, it often ties up capital that could otherwise be used for investment or earning interest. Therefore, interest can be seen as an opportunity cost of holding inventory.