Question
As Chief Financial Officer of your company, you have been asked to create a strategy for financing the company's future plans. You know two things.
As Chief Financial Officer of your company, you have been asked to create a strategy for financing the company's future plans. You know two things.
1) The company's annual cash flow is currently negative at the rate of $ 1,000,000 per year.
2) The company has a $ 5,000,000 line of credit at the bank that matures in two years. It has been used for a total current loan of $ 3,000,000. This line of credit is set at an interest rate of 5%.
You believe that over the next two years, the US economy will experience massive inflation. This will allow your company to substantially raise its prices while its main cost inputs, except for labor are fixed.
What is one smart thing that you should do as a financial manager. And why ?
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