Answer to Question #139504 in Microeconomics for Jonathan

Question

the sales manager of a retail outlet suggests that the best way to increase customers is to have a sale. if a 10 percent price cut doesn’t bring in enough customers then he’ll cut price 20 percent. increased cash flow should take care of profits. do you agree? explain

Answer 1

No, the sales manager needs to generate profits while also operating with positive cash flow,if the reduction in price can cause a negative cash flow then it clearly means that the business is operating at a loss.