Early in a period in which sales were increasing at a modest rate and plan expansion and start-up costs were occurring at a rapid rate,a successful business would likely experience:
A) increased profits and no change in financing requirements.
B) decreased profits and increased financing requirements because of an increasing cash shortage.
C) decreased profits and decreased financing requirements because of an increasing cash surplus.
D) increased profits and increased financing requirements because of an increasing cash shortage.

Question

Quizplus · Accepted Answer

During a period of modest sales growth but rapid expansion and start-up costs, the business would experience a decrease in profits due to the higher costs. This would lead to an increased cash shortage and, therefore, increased financing requirements to fund the expansion and cover operating expenses.

Early in a Period in Which Sales Were Increasing at a Modest