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Cash flow is the Life-Blood of a Company

Cash flow is the Life-Blood of a Company

The first alternative that the firm has is to obtain a long-term loan from one of the financial institutions. In this case, the firm will take a loan obligation that is expected to mature within the next four to five years. This will enable the firm to launch the product and market it in order generate income that will be used to repay the loan. The loan obtained will be used to cater for short term financial obligations of the firm. Another financial measure that may be employed by the firm is the reduction of operational costs. This will be achieved by reducing wasteful operations of the firm. Within the next two years, the management of the firm should allocate resources to those activities that are crucial and the firm cannot function normally without, such as payment of salaries (Heitor, Murillo & Weisbach, 2004).

The firm has another alternative of obtaining funds to keep it in business for the next two years. The company can issue a long-term bond to the members of the public, which will be expected to mature within the next ten years (Bhagat, Moyen & Inchul, 2005). This will enable the firm to obtain funds that will cater to operational costs for the next two years. The amount raised from the sale of long-term bond will help the firm address essential activities in launching the new product. This source of funds will enable the firm to have enough time to launch new product and build the brand loyalty before the time to meet its loan obligation.

In conclusion, the firm needs to employ either of the two alternatives in order to obtain the funds it needs for it to remain in business for the next two years.

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