Manufacturers and shopkeepers would use loans to pay their suppliers and workers until they could ______ to customers.

Manufacturers and shopkeepers would use loans to pay their suppliers and workers until they could ______ to customers.

• A. Pay salaries
• B. Expand operations
• C. Borrow again
• D. Sell goods

Answer: (D)

The idea being tested is how businesses cover the cash flow gap between paying for inputs now and getting cash later from sales. Firms borrow to pay suppliers and workers so operations can continue while they wait to convert inventory into cash by selling goods to customers. Once those goods are sold, the resulting revenue provides the cash needed to repay the loan. Selling goods is the best fit because it directly generates the inflow that ends the need for the temporary financing. Paying salaries, expanding operations, or borrowing again describe other actions or needs, but they don’t capture the immediate cash-in from turning goods into cash that clears the financing gap.

The idea being tested is how businesses cover the cash flow gap between paying for inputs now and getting cash later from sales. Firms borrow to pay suppliers and workers so operations can continue while they wait to convert inventory into cash by selling goods to customers. Once those goods are sold, the resulting revenue provides the cash needed to repay the loan. Selling goods is the best fit because it directly generates the inflow that ends the need for the temporary financing.

Paying salaries, expanding operations, or borrowing again describe other actions or needs, but they don’t capture the immediate cash-in from turning goods into cash that clears the financing gap.