Skip to content

CMA Final · Entrepreneurship and Startup · Scalability, Scaling up and Stabilisation of Sustainable Business

Case: Arjun's logistics startup grew customers fast, but its monthly cash outflow is rising faster than collections because large clients pay after 90 days while drivers are paid weekly. Profit on paper is positive. Which risk is most directly threatening the startup's stabilisation, and what is the most suitable response?

The main threat is liquidity risk caused by a working capital mismatch: weekly payouts against 90-day collections drain cash even though profits appear positive. The suitable response is to shorten receivable terms and arrange working capital finance, not to spend on advertising or rebuild technology.

  1. ATechnology obsolescence; respond by rewriting the app
  2. BLiquidity risk from working capital mismatch; respond by improving collection terms and arranging working capital financeCorrect
  3. CBrand risk; respond by increasing advertising spend
  4. DRegulatory risk; respond by delaying all new contracts permanently

Explanation

Paying weekly while collecting after 90 days creates a working capital gap that can exhaust cash despite accounting profit. Tightening credit terms, factoring or a working capital line addresses it. The other options do not target the cash cycle mismatch.

Did you get it right without looking?

One question tells you little. A timed set on Scalability, Scaling up and Stabilisation of Sustainable Business shows your real accuracy, how long you take and where you lose marks.

Practise Scalability, Scaling up and Stabilisation of Sustainable BusinessFree diagnostic mock

More Scalability, Scaling up and Stabilisation of Sustainable Business questions