An exceptionally high growth rate in sales will typically
A) initially increase the firm's need for discretionary financing.
B) generate enough cash flow to cover asset expansion.
C) allow the firm to increase its dividend in anticipation of higher cash flows.
D) allow the firm to finance expansion with spontaneous sources of financing.

Question

Quizplus · Accepted Answer

A high growth rate in sales often leads to an increased need for assets to support the sales (inventory, receivables, etc.), which in turn increases the firm's need for financing beyond what can be generated internally or through spontaneous sources of financing like trade credit.

An Exceptionally High Growth Rate in Sales Will Typically