Explain how rapidly expanding sales can drain the cash recourses of a firm?

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1161286

2026-07-31 03:50

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A firm's sales may expand as a result of increase in orders, which requires the firm to increase its inventory by purchasing raw material whose payments must be made prior to cash collection from its customers. Thus, the firm has to use either its retained earnings or take on debt to finance the expansion which may result to a negative cash flow

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