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Chapter 6: Problem 17

Inventory investment is (LO2) a) very stable c) fairly unstable b) fairly stable d) very unstable

Short Answer

Expert verified
d) very unstable

Step by step solution

01

Understand Inventory Investment

Inventory investment refers to the changes in the amount of goods and materials that a company holds in stock, either to fulfill customer demands or to maintain their production process. This investment is susceptible to fluctuations dependent on external factors like market conditions, consumer demands, and the company's production strategy.
02

Evaluate the Stability of Inventory Investment

Inventory investment's stability will depend on how volatile these external factors are and how they impact the company's decisions on maintaining their inventory. As these factors are often constantly changing, it is generally considered that inventory investment has a tendency to be unstable.
03

Choose the Correct Option

Based on the understanding that inventory investment is impacted by ever-changing external factors and the general tendency for it to be unstable, we can conclude that the correct answer is: \( \underline{\text{d) very unstable}} \)

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