What is one of the two types of finance costs related to holding inventory?

Holding inventory incurs various finance costs, with one of the primary types being the cost of capital invested in that inventory. This refers to the opportunity cost associated with the capital that is tied up in the inventory rather than being utilized in other investments that could generate returns. When a business allocates funds to purchase and maintain inventory, those funds are not available for other productive uses, resulting in a cost against the business's potential profitability.

This concept is especially critical in inventory management and asset management frameworks, as businesses must account for the financial implications of maintaining inventory levels. Understanding this cost helps organizations make better decisions regarding inventory investment, turnover rates, and overall cash flow management.

The other options do relate to aspects of inventory management and could impact overall operational costs, but they do not represent finance costs specifically tied to the capital aspect of holding inventory in the way that the cost of capital does.