Practice Quiz

Case Interview Prep

Category - Management

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Ted has 10 content projects he wants to push forward. Each one has a positive net present value with an initial up-front investment followed by a multiple-year revenue stream. Which of the following would be the biggest reason why he would not pursue them all right away?
  1. Lock-in
  2. Switching costs
  3. Cash flow cycle
  4. Synergies
  5. Risk
Explanation
Answer: c - The best answer here is cash flow. It is important to recognize the impact of negative cash flow in early periods from investments.

Key Takeaway: Cash is the lifeblood of a company. No company can afford to run out of it. Thus, a company cannot make all the investments that might be profitable because it needs cash to run its operations.
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