Rapid Inc. is a home delivery business, distributing products purchased on the internet. It is profitable and
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Rapid Inc. is a home delivery business, distributing products purchased on the internet. It is profitable and has seen rapid growth over the years, expanding its fleet of delivery vans. It pays its drivers weekly wages but its customers, whose products it delivers, can take up to 60 days to pay. Which statement is consistent with the business?
- The long customer collection period coupled with strong growth is likely to lead to a cash shortfall requiring external financing
- Since the business is profitable and growing there should not be any need for external financing
- The business model is liable to result in significant fluctuations in operating cash requirements and would typically be too high a risk for a bank to finance
- The business will have strong operating cash flow and is unlikely to required external financing.
Related Book For
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
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