The more variable the firm's cash flows from operating activities, the more risk that the firm will not have sufficient cash to meet the required payments.Failure to meet these obligations can result in
A)default.
B)creditor intervention in the management of the firm.
C)regulatory intervention in the management of the firm.
D)bankruptcy.
E)All of these answer choices are correct.

Question

Quizplus · Accepted Answer

All of the answer choices are correct as failure to meet required payments can lead to default, creditor intervention, regulatory intervention, or bankruptcy. The variable cash flows increase the risk of such adverse events occurring. Thus, it is crucial for the firm to manage its cash flow effectively and maintain sufficient reserves to cover any contingencies.

The More Variable the Firm's Cash Flows from Operating Activities