An accelerated flow of funds through the supply chain can improve a firm's profitability by:
A) Increasing interest rates
B) Customers cannot be invoiced more quickly
C) Creating a positive cash flow provides financial opportunity
D) Increasing working capital needs
E) None of the above

Question

Quizplus · Accepted Answer

When a firm is able to accelerate the flow of funds through its supply chain, it can create a positive cash flow which provides financial opportunity. This can lead to increased profitability by allowing the firm to invest in growth, reduce debt and/or pay dividends to shareholders. Increasing interest rates (A) would have the opposite effect, making it more expensive for firms to borrow and pay their debts. Invoicing customers more quickly (B) may not necessarily lead to increased profitability as customers may have specific payment terms and credit limits. Increasing working capital needs (D) may not necessarily lead to increased profitability either, as this could put strain on the firm's cash flow and lead to increased debt.

An Accelerated Flow of Funds Through the Supply Chain Can