Question

A "cash hog" type of business

Multiple Choice

• generates cash flows over and above its internal requirements.

• is always a candidate for divestiture.

• generates cash flows that are too small to fully fund its operations and growth.

• generates cash flows exactly matching the demand for operations and growth.

• has good resource fit with a cash cow business and is essential to a diversified company's lineup of businesses.

Answer 1

Cash hog is a business segment of company whose internal cash flows are inadequate to fully fund its operations and growth.

It needs cash support from other business segments of company.

However, cash hog need not be always candidate for divestiture. Sometimes cash hog is attractive business investment which needs cash pumping for few years.

Therefore option 3 is correct.

A "cash hog" type of business generates cash flows that are too small to fully fund its operations and growth.