Question

A business would like to invest in a new product, but they are short on extra

cash for such purposes. They are in a good position as a business, though:
Their employee costs are average, their market share is relatively high, and
they hàve enough inventory on hand to last for months. What would be one
good solution if they want to find extra cash for the new product?
OA. Fire at least one employee.
OB. Liquidate some inventory to increase cash flow.
O C. Cut wages for all employees.
OD. Raise prices on their inventory even if it takes longer to sell it.

Answer 1

B. Liquidate some inventory to increase cash flow.

Step-by-step explanation:

Inventory refers to the items meant for sale. Liquidating is converting assets into cash. Liquidating inventory means selling some inventory to generate cash. The business has enough inventory to last for months. Since the firm needs cash now, its best option is to sell some of its inventory.

Having inventory that can last for months is tying up resources that could be used in other ways. Keeping high levels of inventory is not prudent. It is not an investment that can generate more income. There is also the risk of theft and damages.