Question

Which of the following could lead to cash flow problems?

1) Obsolete inventory, improved quality of accounts receivable, easing of credit by suppliers
2) Obsolete inventory, increasing notes payable, easing of credit by suppliers
3) Slow-moving inventory, accounts receivable of inferior quality, tightening of credit by suppliers
4) Obsolete inventory, accounts receivable of inferior quality, easing of credit by suppliers

Answer 1

The factors that could lead to cash flow problems are slow-moving inventory, accounts receivable of inferior quality, and tightening of credit by suppliers.

Step-by-step explanation:

The correct answer is option 3) Slow-moving inventory, accounts receivable of inferior quality, tightening of credit by suppliers. These factors can lead to cash flow problems for a business.

Slow-moving inventory means that products are not selling as quickly as expected, which can tie up a business's funds and create a cash flow issue. Accounts receivable of inferior quality refers to customers who are not paying their bills on time or not paying the full amount owed, reducing the cash flow coming into the business.

Tightening of credit by suppliers means that suppliers may require faster payment terms or reduce credit lines, making it harder for the business to manage its cash flow.