Why would an organization typically need additional finance?

An organization typically needs additional finance to cover operational costs and support expansion because these are vital functions that help maintain and grow the business. Operational costs include daily expenses such as salaries, rent, utilities, and raw materials, which are essential for the ongoing viability of the business. When an organization is expanding, whether by opening new locations, increasing production capacity, or investing in marketing, it requires substantial financial resources to support these initiatives.

Financing for expansion can help the organization take advantage of new opportunities, address increased demand, diversify products or services, and improve its market position. This need for additional finance reflects a strategic approach to growth and sustainability, ensuring that the organization can effectively manage its operations while pursuing new avenues for development.

Other choices do not encompass the broader needs for additional finance as comprehensively. For instance, while increasing inventory for future sales may be necessary, it does not cover operational costs or the more extensive needs associated with expansion. Similarly, focusing only on maximizing net income does not necessarily address the immediate financial requirements to sustain operations. Paying off outstanding loans exclusively is also a narrow approach that may not align with the organization's growth strategy or operational needs.