MONITOR INVENTORY RECORDS. Firms deplete their inventories by transferring raw materials
into the production process (the conversion cycle) and by selling finished goods to customers (revenue cycle. Our illustration assumes the latter case, in which inventory control monitors and records finished goods inventory levels. When inventories drop to a predetermined reorder point, a purchase requisition is prepared and sent to the prepare purchase order function to initiate the purchase process. Figure 5-2
presents an example of a purchase requisition.