A company such as W.T.Grant which perennially experiences deficit cash flow from operating activities must delay investment projects and generally

Question

Quizplus · Accepted Answer

A company experiencing deficit cash flow from operating activities cannot rely on internal funds to finance its investment projects. Therefore, it must resort to external sources such as loans or issuing stocks/bonds to raise capital for such projects. This allows the company to conserve its much-needed cash for day-to-day operations and other essential expenses. Option A is incorrect as increasing dividends would further reduce the cash available to the company. Option B is also incorrect as the company cannot afford to increase wages and salaries if it is already experiencing a cash flow deficit. Option C is incorrect as decreasing depreciation expenses would increase the company's taxable income and result in higher tax payments.

A Company Such as W