Question

How does a short-term cash flow crisis spiral into bankruptcy for some firms?

Answer 1

short-term financial consideration often creates serious difficulties for firms in every industry. You need Looking at your industry and observ how the scenario is going.

And coming to the point each and every firm is striving hard for a competitive advantage in industry , this competitive advantages are different types in respect to sales and cost and techontech etc.... But each and every of this advantage are depends upon the firms cash flows , for gaining an advantage in industry we need a favourable cash flow otherwise there is a greater chance to collapse the organization.

for example we need to expose and advertise our existing or new products, for this we need some cash flows, I mean money. this is a short term activity to create interest and attention towards our products in the market , the first case we have cash flows , so we can advertise then all will goes good but in the second case if there is cash flow crisis in our firm , our products are useless if the product is really good , it leads to foregone our competitive advantage . So cash flows are very much important in each and every industry.