You are part of the management team of Diggit Heavy Equipment Ltd., which sells excavators, dump trucks, and other heavy equipment across Eastern Canada. At a management meeting to discuss how to improve the company’s profitability and cash flows, one of your colleagues states the following:
“We need to set up a program where we can lend money to our customers to finance their equipment purchases. I think that if we off er three-year notes receivable at a low interest rate, it will entice many of our customers to buy additional equipment. This will increase sales revenue and net income, which will also increase cash flows from operating activities.”

Required

Review your co-worker’s proposal. Explain if her thinking is correct and whether or not it will help the company meet its objectives. Identify and explain the fl aws in your co-worker’s logic.