An amusement park operates daily from Victoria Day to Labour Day. In addition, the park is open Fridays, Saturdays, and Sundays throughout May and September. The park finds that the revenue produced from weekend-only operations in May and September is not enough to cover the expenses they incur in those months. Which of the following circumstances requires the amusement park to seek outside financing to cover its short-term cash shortages?
A) cash shortfall due to growth
B) long-term financing
C) seasonal cash flows
D) a positive cash-flow cycle

Question

Quizplus · Accepted Answer

The amusement park's seasonal cash flows, specifically the fact that the revenue produced from weekend-only operations in May and September is not enough to cover expenses, indicates that they will experience short-term cash shortages during those months. This would require them to seek outside financing in the form of a short-term loan or line of credit to cover their expenses until their cash flow improves during the peak summer season.

An Amusement Park Operates Daily from Victoria Day to Labour