A retail company has $500,000 in cash and $1 million in inventory. The company's sales have been declining, leading to excess inventory. What is the likely impact on the company's financial health?

Declining sales mean the company is having trouble selling its inventory, so more of its resources remain tied up in goods rather than becoming cash. This can strain financial health because the $1 million in excess inventory is not readily available to pay expenses or invest elsewhere. The likely impact is capital tied up in unsold inventory.

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