Which of the following is NOT typically a cause of a cash flow problem (a mismatch between cash inflows and cash outflows) for a business?

• A. Large increases in inventory levels that require significant cash outlays
• B. Rapid sales growth combined with liberal credit terms that delay customer cash collections
• C. Significant loan principal repayments coming due in the current period
• D. Customers paying sooner than expected (faster accounts receivable collections)

Answer: (D)

Verified step by step guidance

1. Understand that a cash flow problem occurs when cash outflows exceed cash inflows, causing a timing mismatch that can strain a business's liquidity.
2. Analyze each option to determine if it typically causes cash outflows to increase or inflows to decrease, leading to cash flow difficulties.
3. Recognize that large increases in inventory require cash to purchase goods, increasing cash outflows and potentially causing cash flow problems.
4. Note that rapid sales growth with liberal credit terms delays cash inflows because customers take longer to pay, worsening cash flow.
5. Identify that significant loan principal repayments require cash outflows in the current period, which can create cash flow pressure, whereas customers paying sooner than expected actually improves cash inflows and reduces cash flow problems.