Final answer:
A small company may offset a shortage of cash flows from operating activities by cutting back on capital expenditures, borrowing funds, or issuing stock.
Step-by-step explanation:
True. If a company's cash flows provided by operating activities are relatively small, the company may offset this problem on a short-term basis by implementing various strategies. One strategy is cutting back on capital expenditures, which means reducing spending on long-term assets such as property, plant, and equipment. Another strategy is borrowing funds, either from a bank or by issuing bonds. This allows the company to access additional liquidity to cover its operating cash flow shortage.
Finally, the company may choose to issue stock, which involves selling ownership in the company to the public. This can provide a source of immediate cash without any obligation to make interest payments. However, it's important to note that issuing stock may lead to dilution of ownership and potential loss of control for existing shareholders.