A company that produces racing motorbikes has several models that sell well within the motorcycle racing community and which are very profitable for the company. These motorbikes are sold to retail customers and also business customers who were provided with 60-day credit terms. Despite having a profitable product, why must this company take care to ensure that it has sufficient cash on hand to meet its obligations?

(a) The company will have built up debts which must be repaid in order to bring the current models to market.

(b) Profits from the sales of popular models will be lost when returned to the shareholders in the form of dividends.

(c) Profits are not necessary reflected in the current cash balance of its bank account.

(d) Equity must be raised to finance the development of new models to replace the existing models.