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If there appears to be a cash shortfall, the company may have to take one or more of the following steps:
- increase its overdraft (if it’s not already at the limit)
- increase its longer-term borrowings
- rasing money through a share issue (the company must have a good record of profitability and of dividend growth, and the share price must be high)
- tightening credit and inventory control, paying suppliers later
- limiting capital expenditure
- entering into sale and leaseback arrangments (it will need some assets which are not already charged)
- selling some assets
- purchasing a cash-rich company by issuing shares in consideration.
The company should consider most measures in preference to:
- reducing dividends
- reducing its level of activity.
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