Final answer:
Firms with inadequate cash flow to meet immediate needs are experiencing liquidity problems. This inability to quickly convert assets to cash may lead to insolvency and contribute to a business's decision to exit the market. Therefore , the correct answer options is c)
Step-by-step explanation:
Firms that can't generate cash quickly enough are referred to as having liquidity problems. Liquidity is a firm's ability to convert assets into cash; a lack of liquidity can lead to the inability to meet short-term obligations and can cause serious financial distress for the company.
This can contribute to a firm's decision to exit the market if these problems persist, often resulting from the inability to cover variable costs and ultimately leading to losses and cessation of production in the long run.
Conditions that might lead to liquidity problems include poor management, non-competitive products, shifts in consumer demands, increase in input costs, or an unexpected fall in prices for the company's outputs.
Conversely, issues like stockouts, where a business runs out of stock on products, vertical integration problems, where supply chain integration is flawed, sagging problems, which could refer to a decline in business performance or market position, and high inventory turns, which indicate potentially excessive product movement or inefficiency, are other challenges businesses might face, though they do not refer to the same cash generation issue as liquidity problems.