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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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