What happens to a firm whose uses of cash exceed its sources of cash during an accounting period?

Question

Quizplus · Accepted Answer

If a firm's uses of cash exceed its sources of cash during an accounting period, it is experiencing a negative cash flow. This means that the firm is spending more money than it is bringing in, which leads to a decrease in its cash balance. The firm may need to reduce its expenses, sell assets, or borrow money to cover its cash shortfall. Therefore, option D is the correct answer. Option A may be a possible solution, but it might not be sustainable in the long run, as short-term borrowing typically comes with interest payments that increase the firm's financial obligations. Option B could be a consequence of a negative cash flow, but it is not the immediate result. Option C is the opposite of what happens in this scenario.

What Happens to a Firm Whose Uses of Cash Exceed