Looking forward to next year, if Baldwin's current cash balance is $17,334,000 and cash flows from operations are expected to remain the same, Baldwin intends to take the following actions related to cash flows from investing and financing activities: 1. Issue 100,000 shares of stock at the current stock price. 2. Issue $200,000 of long-term debt. 3. Pay $40,000 in dividends. Which of the following activities will expose Baldwin to the highest risk of needing an emergency loan? a) Sell $5,000,000 of their long-term assets. b) Purchase assets costing $15,000,000. c) Retire $20,000,000 in long-term debt. d) Liquidate the entire inventory. [Select the most appropriate option.]

The activity that will expose Baldwin to the highest risk of needing an emergency loan among the given options is c) Retire $20,000,000 in long-term debt.

Retiring $20,000,000 in long-term debt would require Baldwin to pay a substantial amount of cash at once, significantly depleting their cash reserves. If the company's cash flows from operations remain the same and are not sufficiently high to replenish the cash balance after such a large outlay, Baldwin would be at a high risk of running out of cash, which might force the company to seek an emergency loan to cover other obligations and operational expenses.

Extra: When a company like Baldwin manages its cash balance, it's important to consider both cash inflows and outflows and their timing. Cash inflows can come from operations (like sales revenue), investing activities (like selling assets), and financing activities (like issuing stock or debt). Outflows are caused by operating expenses, asset purchases, dividends, and debt repayment.

1. Issuing stock and debt are financing activities that represent cash inflows and would actually increase Baldwin's cash balance. 2. Paying dividends is an outflow, but given the current cash balance and considering the size of the other figures, it is relatively small. 3. Selling assets would provide a temporary cash inflow. 4. Purchasing assets or retiring debt would both result in cash outflows.

The amounts must be carefully considered. Purchasing assets for $15,000,000 would be a significant outflow, but retiring $20,000,000 in debt is an even larger outflow. Therefore, without high-enough cash inflows from operations or other sources to cover these outflows, the greatest risk of needing an emergency loan would come from the largest cash outlay, which in this case is retiring long-term debt of $20,000,000. It is important for companies to plan and forecast their cash flows to avoid such situations where they might face liquidity problems.