When there is an unplanned decrease in inventories________. a. a firm experiences much higher sales than expected. b. actual inventory investment equals planned inventory investment. c. actual inventory investment is less than planned inventory investment. d. actual inventory investment is greater than planned inventory investment.
Question
When there is an unplanned decrease in inventories________.
a. a firm experiences much higher sales than expected.
b. actual inventory investment equals planned inventory investment.
c. actual inventory investment is less than planned inventory investment.
d. actual inventory investment is greater than planned inventory investment.
Solution
The correct answer is:
d. actual inventory investment is greater than planned inventory investment.
Here's why:
An unplanned decrease in inventories means that a company has sold more of its products than it had anticipated. This means that the actual inventory investment (the amount of money a company has put into its inventory) is greater than the planned inventory investment (the amount of money a company had intended to put into its inventory). This is because the company had to use more of its resources to produce more goods to meet the higher demand, resulting in a higher actual inventory investment.
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