Which are described as ways of over-extending resources?

Which are described as ways of over-extending resources?

• A. Borrowing too much money; Buying too many assets; Buying too much stock; Having too many employees
• B. Reducing production; Outsourcing; Cutting costs
• C. Mergers and acquisitions; Joint ventures; Licensing
• D. Focusing on one product line; Cutting marketing

Answer: (A)

Over-extending resources happens when a business commits more of its money, capacity, and people than it can reliably support. Borrowing too much money increases debt and interest payments, squeezing cash flow and leaving less room to handle tough times. Buying too many assets ties up capital in long-term investments and raises depreciation and maintenance costs, reducing flexibility. Buying too much stock creates high inventory carrying costs and the risk of obsolescence, tying up cash that could be used elsewhere. Having too many employees boosts ongoing wage and benefits costs, reducing profitability and adaptability. The other options describe strategies that lessen or reallocate resource use (like reducing production, outsourcing, cutting costs, or entering partnerships) or focus resources on fewer areas, which do not reflect over-extending resources.

Over-extending resources happens when a business commits more of its money, capacity, and people than it can reliably support. Borrowing too much money increases debt and interest payments, squeezing cash flow and leaving less room to handle tough times. Buying too many assets ties up capital in long-term investments and raises depreciation and maintenance costs, reducing flexibility. Buying too much stock creates high inventory carrying costs and the risk of obsolescence, tying up cash that could be used elsewhere. Having too many employees boosts ongoing wage and benefits costs, reducing profitability and adaptability. The other options describe strategies that lessen or reallocate resource use (like reducing production, outsourcing, cutting costs, or entering partnerships) or focus resources on fewer areas, which do not reflect over-extending resources.