SALLY is a luxury automobile company that prides itself on its prestigious brand and exclusivity. It has gone through a recent slump in sales and has hired your consulting firm to advise on the situation. It is June 10, Year 1, and Soho has a year end of December 31. Its new line of SUVs has not sold as quickly as management had estimated, and airbag recalls have reduced its share price.

SALLY is at risk of defaulting with several of its creditors, and it is at the limit of the debt-to-equity ratio covenant for its bank loan. All its loan agreements are restricted, with renewal opportunities in the following fiscal year. It also has a higher-than-industry-average dividend yield that it distributes to its shareholders at the end of each quarter. The inventory turnover has been increasing over the last three years, and the working capital ratio has increased from the prior year.

SALLY has contemplated four business scenarios requiring cash:

1. Pay the planned dividend
2. Pay its creditors
3. Hold funds for potential recall liability payments
4. Buy back stock

The company would like your advice on how to best manage its cash flow for the remainder of the year. Given the current situation, what is the BEST order of prioritization of the business scenarios?

a.2, 3, 1, 4

b.3, 1, 2, 4

c.1, 2, 3, 4

d.1, 2, 4, 3