Please assist me in understanding this question
As a common practice, Rova Inc. mostly collects upfront payments for goods that will be delivered to customers in the future. Unearned revenues contribute significantly to the company’s current liabilities.
Commentator A: The advance cash received from customers can be used to finance the company’s operations, and the corresponding liabilities that are recorded will appear as sales in future financial statements. Therefore, this practice is beneficial to Rova Inc. and should be continued.
Which of the following statements weakens commentator A’s argument?
- Rova Inc.’s cash flow statement shows that the company does not have enough cash to scale up its operations in the next year.
- Rova Inc.’s long-term liabilities are not offset by its current assets.
- Rova Inc.’s ability to deliver exactly as per its commitments to its customers is frequently impacted by its unreliable suppliers.
- A majority of the orders received by Rova Inc. from its customers are for customized products.