Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 5 - Balance Sheet and Statement of Cash Flows - Review and Practice - Questions - Page 237: 3


Financial flexibility normally alludes to a company's ability to react to the unexpected expenses as well investment opportunities and its normally assessed by examining a company's use of leverage as well cash holdings. Importantly, a company with a high level of financial flexibility normally has high chances of surviving bad times, to recover from unexpected setbacks as well to take advantage profitable and unexpected investment opportunities.

Work Step by Step

Financial flexibility is also associated with the ability of an enterprise to take effective actions to alter the amounts as well timing of its cash flows so that it can respond to unexpected opportunities and needs. Generally, the greater the financial flexibility the lower the risk of the enterprise to fail.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.