What might a business do to handle a shortage of cash?

A business facing a cash shortage often looks for strategies to manage its finances effectively. Spreading costs over a longer period allows the business to alleviate immediate cash flow pressures. By extending payment terms for bills or negotiating with suppliers to pay later, the company can retain cash for daily operations, investments, or other essential expenses. This approach gives the business flexibility and a better chance of stabilizing its financial situation without resorting to drastic or harmful measures.

Increasing employee salaries would generally not be a prudent action during a cash shortage, as this would further strain cash flow. Stopping the sale of products would likely exacerbate the cash shortage, leading to a loss of revenue. Requiring immediate cash payments might not be feasible if customers are accustomed to credit terms, and could negatively impact sales. By spreading costs over a longer timeframe, businesses can maintain operations and potentially recover financially.