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      Question

      Which of the following items cannot normally be reduced

      to generate short-term internal funds for a company?
      A Trade receivables Correct Answer Incorrect Answer
      B Cash balances Correct Answer Incorrect Answer
      C Inventory Correct Answer Incorrect Answer
      D Staff advances recoverable within a year Correct Answer Incorrect Answer
      E Plant & Machinery Correct Answer Incorrect Answer

      Solution

      • Short-term internal funds are generated by adjusting current assets, such as: o Reducing trade receivables (speeding up collections). o Lowering inventory levels. o Curtailing cash holdings beyond operating needs. o Recovering short-term staff advances. • In contrast, Plant & Machinery (like buildings) is a fixed asset, and selling or reducing it is a long-term decision, not a typical short-term financing source.

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