How does a short-term cash flow crisis spiral into bankruptcy for some firms?

Managing Inventory and Cash Flow Crisis

Complete the following discussions:

• Inventory management is critical to success in the simulation. With respect to your team, discuss how you decide to balance the risk of stockouts against the costs of maintaining excess inventory.
• Every week, you have to consider the cash flow of your firm. This short-term financial consideration often creates serious difficulties for firms in the footwear industry. Looking at your industry to date, consider the following questions:
  • Why do firms have trouble managing their cash flow? What events cause a cash flow crisis in the simulation?
  • How does a short-term cash flow crisis impact a firm’s competitive strategy?
  • How does a short-term cash flow crisis spiral into bankruptcy for some firms?