Final answer:
Excess inventory can cause various problems for a business, including tying up capital, potential financial losses, and increased storage costs. To address these issues, businesses should implement effective inventory management practices and consider offering incentives to sell excess inventory.
Step-by-step explanation:
Excess inventory can lead to several problems for a business. Firstly, it ties up a company's capital, as the inventory that is not being sold represents money that could be used elsewhere. Secondly, excess inventory can become obsolete or expire, resulting in financial losses for the business. Lastly, it can also lead to increased storage costs and the need for additional space to accommodate the excess inventory.
To address the problems caused by excess inventory, businesses should implement effective inventory management practices. This includes accurately forecasting demand, establishing reorder points and quantities, and regularly evaluating inventory levels to identify and address any excess inventory. Additionally, businesses can also consider offering incentives or discounts to encourage sales of excess inventory.