a profitable firm finds that it simply must "stretch" its accounts payable, then this suggests that it is undercapitalized, i.e., that it needs more working capital to support its operations.

Question

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Stretching accounts payable means delaying payments to suppliers, which may indicate a cash flow problem and insufficient working capital. If the firm were well-capitalized, it would have the funds to pay its bills on time without resorting to stretching its payables.

A Profitable Firm Finds That It Simply Must "Stretch" Its