Small firms frequently run into problems when:
A)they offer equipment as collateral for a term loan.
B)they under-utilized the equipment purchased with the loan.
C)they overestimate the cash inflows from the equipment purchased with the loan.
D)they faiil to match a term loan's payment terms with the expected cash inflows from the equipment purchased with the loan.

Question

Quizplus · Accepted Answer

The most common problem that small firms run into is that they fail to match a term loan's payment terms with the expected cash inflows from the equipment purchased with the loan. This leads to a cash flow mismatch and can cause the firm to default on the loan. It's important for small firms to carefully analyze their cash flows before taking on debt to ensure that they can comfortably make the loan payments.

Small Firms Frequently Run into Problems When