A Company That Produces Racing Motorbikes Has Several Models That

question 83

Multiple Choice

A company that produces racing motorbikes has several models that sell well within the motorcycle racing community and that are very profitable for the company.Despite having a profitable product,why must this company take care to ensure that it has sufficient cash on hand to meet its obligations?

• A)Profits from the sales of popular models will be lost when returned to the shareholders in the form of dividends.
• B)New models will require a lot of money to develop and bring to market before they generate any revenue.
• C)The company will have built up debts which must be repaid in order to bring the current models to market.
• D)Equity must be raised to finance the development of new models to replace the existing models.
• E)This will enable the company to maintain a high share price for its stock.