What impact do mark downs have on inventory management?

Mark downs play a significant role in inventory management by helping to clear out inventory. When businesses reduce the prices of certain items, it incentivizes customers to purchase products that may otherwise remain unsold, particularly older stock or seasonal items. This strategy is crucial for maintaining healthy inventory levels and ensuring that there is space for new products.

Mark downs can also contribute to improved cash flow since the quicker turnover of inventory can lead to more frequent sales, even at reduced prices. This is particularly important in retail settings where trends change rapidly, and businesses need to adapt by refreshing their inventory regularly.

In the context of the other options, increasing the price of existing inventory contradicts the essence of mark downs, which are specifically aimed at reducing prices. Preventing sales during peak seasons or maintaining high price levels similarly goes against the goal of mark downs, as these strategies would not facilitate the movement of inventory but rather lead to stagnation.