Grape Vineyards,LLC,is an old winery in Napa Valley.It has been suffering problems with its cash flow and will need financing to make it through the fall grape crush.It has considered several ways to increase sales including giving tours,selling tickets to watch the crush,and selling its existing bottled wine inventory through more outlets,but these activities will be insufficient to raise the funds needed for the next three months to cover payroll,machinery and equipment expenses,advertising,and operating expenses.It has several thousand dollars in accounts receivable that it is working diligently to collect and has revamped its accounts receivable practices to remove lags between billing and payment.It has already sold the wine in its inventory.The white wine that will be produced this year will not be ready for bottling for four months and the red wines will not be ready for two years.What will the company do to be able to pay bills for the next three months?

Question

Quizplus · Accepted Answer

Grape Vineyards, LLC needs to cover its short-term expenses, including payroll, machinery and equipment expenses, advertising, and operating expenses for the next three months. Therefore, obtaining short-term financing is the best choice for the company. Trade credit may not provide sufficient funds, and engaging in speculative production may not be a feasible option since the white wine will not be ready for four months and the red wines will not be ready for two years. Long-term financing is also not suitable for covering short-term expenses.

Grape Vineyards,LLC,is an Old Winery in Napa Valley