Final answer:
The ability of a company to alter cash flows to leverage unexpected investment opportunities is known as financial flexibility, involving effective cash flow management and access to multiple sources of capital.
Step-by-step explanation:
The ability of a company to alter cash flows in order to take advantage of unexpected investment opportunities is generally referred to as financial flexibility. This concept is crucial to a company's growth and ability to capitalize on new ventures or investments without being hampered by cash constraints.
Financial flexibility stems from managing cash flow effectively and having access to capital that can be utilized when a suitable investment opportunity arises. Firms achieve this through reinvesting profits, obtaining funds from early-stage investors, borrowing through banks or bonds, and issuing stock.
A firm with strong financial flexibility will be better equipped to make strategic decisions in a volatile market, engage in speculation when opportunities present, and ensure the business's resilience and long-term growth. A company needs to consider the trade-offs involved in each source of capital, such as potential interest payments on debt or the dilution of ownership through issuing new stock.