Business – 5.3 Forecasting and managing cash flows – Cash flow forecasts | e-Consult
5.3 Forecasting and managing cash flows – Cash flow forecasts (1 questions)
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Both approaches provide immediate cash, but they differ markedly:
| Aspect | Revolving Line of Credit | Sale of Non‑Core Asset |
|---|---|---|
| Cost | Interest charged on drawn amounts; fees may apply. | One‑off cash inflow; no ongoing interest, but possible loss of future resale value. |
| Risk | Risk of increasing debt levels; covenant breaches if cash flow deteriorates further. | Risk of reducing operational flexibility if the asset later becomes needed. |
| Long‑term Impact | Maintains asset base; can be reused repeatedly, supporting growth if managed well. | Permanent reduction in asset base; may affect future borrowing capacity and earnings potential. |
In summary, a line of credit is generally more flexible but adds recurring cost and debt risk, whereas selling a non‑core asset provides a one‑off cash boost without interest but may compromise future strategic options.