Expansion could improve cash inflows later if market demand grows. Which option describes this potential?

• A. Reduction in working capital requirements immediately.
• B. Higher revenues leading to improved cash inflows.
• C. Immediate profits from sale.
• D. Reduction in depreciation.

Answer: (B)

The key idea is that expansion can create higher cash inflows in the future by boosting sales as market demand grows. When demand rises, the business can sell more units, leading to more cash receipts from customers. This is about operating cash flow: the actual cash coming in from sales.

The option that describes higher revenues leading to improved cash inflows captures this link between growth in demand, increased sales, and the resulting cash receipts. The other ideas relate to cash effects that aren’t about growing future demand: reducing working capital now shifts cash today, not because demand will grow; immediate profits from a sale reflect accounting profitability, not future cash receipts; and depreciation is a non-cash expense, not a cash inflow.