Which of the following is a key benefit of cash-flow forecasting for ABC?

• A. Anticipate shortages in cash
• B. Improve employee skills
• C. Increase long-term debt
• D. Reduce product quality

Answer: (A)

Cash-flow forecasting focuses on liquidity—the business’s ability to meet its cash obligations as they come due. A key benefit is anticipating cash shortages so you can arrange short-term financing, delay non-essential spending, or accelerate receipts before problems arise. This proactive insight helps keep day-to-day operations running smoothly and reduces the risk of urgent, costly financing later.

Other choices don’t fit because improving employee skills is about human resources, not cash flow; increasing long-term debt is a financing decision that may be prompted by cash needs but isn’t itself a direct benefit of forecasting; and reducing product quality would harm the business and has no relation to forecasting.