Companies can resolve the common cash flow challenges by taking all of the following measures, EXCEPT
A) increasing the amount of capitalization.
B) shortening the cash-to-cash cycle.
C) increasing the rate of growth.
D) decreasing the amount of capitalization.

Question

Quizplus · Accepted Answer

Decreasing the amount of capitalization can actually exacerbate cash flow challenges, as it typically involves reducing long-term funding sources and relying more heavily on short-term financing, such as bank loans or lines of credit. Instead, companies should focus on increasing their capitalization (through equity financing or long-term debt) while simultaneously shortening their cash-to-cash cycle to improve their working capital management and overall cash flow position. Accelerating the rate of growth can also be helpful, but only if it is balanced with sufficient cash reserves or external funding to support the increased levels of operations and investment.

Companies Can Resolve the Common Cash Flow Challenges by Taking