A retail store has days' sales in inventory of $30$ days and an average collection period of $10$ days. The firm pays its suppliers in an average of $45$ days. Taken together, what do these average values imply about the firm's operations and its cash flows?

Multiple Choice

The firm must pay out cash $85$ days BEFORE receiving payment. This creates a NEGATIVE cash flow which the firm must finance.

The firm must pay out cash $65$ days BEFORE receiving payment. This creates a NEGATIVE cash flow which the firm must finance.

The firm must pay out cash $5$ days AFTER receiving payment. This creates a POSITIVE cash flow which the firm can use to finance its other activities.