Final answer:
The periodic inventory system has several disadvantages, including difficulties in long-term strategic planning due to delayed inventory tracking, challenges in analysis due to intermittent updates, and limitations imposed by software and hardware requirements. It also struggles with future contracting and typically results in imperfect information that hampers price negotiations.
Step-by-step explanation:
The weaknesses of the periodic inventory system are central to understanding why some businesses may opt for alternative methods. One of the major disadvantages is the difficulty in conducting accurate long-term assessments, which is critical for strategic planning. The periodic system does not allow for real-time tracking of inventory, leading to less timely and potentially less accurate financial information.Additionally, the periodic system can be challenging to analyze because it does not provide continuous updates, making it difficult to parameterize or communicate timely data. This limitation could lead to problems such as an increased chance of surpluses and shortages within markets, impacting a business's ability to adjust to price changes efficiently.The nature of the periodic system can also be limiting due to its reliance on existing software and hardware requirements. Moreover, for business activities like future contracting, particularly involving perishable goods, the periodic inventory system does not support the level of detail and forecasting required for such transactions, much like the ineffectiveness of a barter system for future transactions.Last but not least, imperfect information, a characteristic often found in a periodic inventory system, can make it difficult for a buyer and seller to agree on a price, as both parties may not have access to complete and accurate data regarding inventory levels and costs.