Question 2: (15 points):

One of the most critical elements an entrepreneur will face is your ability to manage cash flow, especially cash flow shortages. Businesses experience cash flow patterns that are positive and negative (i.e., peaks & valleys). You must plan accordingly when you anticipate it will be necessary to provide a capital infusion AND plan before it happens.

Explain, in detail, how you would effectively deal with and plan for any deficit situations in your business (think Chapter 5 and the Pro Forma Income Statement & Balance Sheet).

If there is a projected shortage, how will you cover it?

Explain the risk return tradeoffs you will need to make in covering any DFN shortage. Make sure to include a discuss of the leverage factors (think the leverage ratios and how they change depending on how you decide to get your capital infusion) and how they impact risk/return.