The company owns several fully paid trucks but has almost no bank balance and current bills are due. Which financial weakness is immediate?
- AInsufficient depreciation expense only
- BExcessive gross profit
- CToo much license scope
- Insufficient working cash
Why D is correct
The best answer is: Insufficient working cash. Assets do not necessarily convert to cash in time for current obligations. Cash forecasts, collections, credit terms, reserves, and working capital manage short-term solvency. The new fact pattern changes the setting, not the governing rule or management control. The other choices either skip a required step, apply a different rule, or fail to address the stated risk.