Question

"A firm's cash borrowing needs can be reduced if its inventory turnover rate can be increased.

A True
B False"

Answer 1

When a firm needs a surge of financial capital for a major expansion, borrowing money is the preferred option as it allows the firm to maintain control of its operations. However, it comes with the commitment to scheduled interest payments.

Step-by-step explanation:

When a firm needs a surge of financial capital for a major expansion, it can choose to raise the funds through borrowing or by issuing stock. In this case, borrowing money would be the preferred option. This is because borrowing allows the firm to maintain control of its operations and not be subject to shareholders. However, it's important to note that borrowing money also comes with the commitment to scheduled interest payments, regardless of the firm's income.