Which of the following best defines an open to buy plan?

An open to buy plan is fundamentally a budget for inventory purchases, serving as a critical tool in retail management. This financial strategy outlines the amount of money that can be spent on new inventory during a specific period, ensuring that retailers maintain a balanced approach to stock levels. It helps in effectively managing cash flow by aligning inventory acquisition with sales projections, preventing overstock or stockouts.

By keeping track of what has been purchased and what can still be bought, retailers can ensure they are strategically allocated the right amounts of inventory relative to demand. An open to buy plan takes into account sales trends, seasonal variations, and current inventory on hand, allowing for informed decision-making when it comes to replenishing stock.

Understanding this concept aids in maximizing sales potential while minimizing excess inventory, which is essential for profitability in retail environments.