1. Explain what you understand by the following statement. When a firms planned inventories go up that is a sign of economic well-being but when its unplanned inventories go up it is a sign of economic weakness. (In your answer tell stories about how a firms inventories could go up due to either planned or unplanned changes in inventories.

How does your explanation to the first part explain why we also calculate the quick ratio in assessing the firm's liquidity position? Explain.