Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 5 - Balance Sheet and Statement of Cash Flows - Questions - Page 279: 3

Answer

Financial flexibility refers to the capability of an entity to alter its cash flows in response to an unexpected opportunity or need. Financial flexibility is critical because it defines the ability of an organization to survive unforeseen market and economic fluctuations.

Work Step by Step

An organization with a high financial flexibility means that it has the ability to make it through times of financial crisis and recover from unexpected losses and can also invest in new opportunities.
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