The Faster a Firm Grows, the Greater Is the Shortfall

question 38

Multiple Choice

The faster a firm grows, the greater is the shortfall in cash and the firm might borrow funds from the bank on a revolving credit arrangement.Why?

• A)Most of the cash outflows for expenses occur before the firm receives the cash inflows from a sale.
• B)The lag between cash outflows and cash inflows can lead to cash shortfalls.
• C)Cash disbursements to employees and suppliers precede cash collections from customers.
• D)all of the above
• E)none of the above

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