When assessing the risks and opportunities of a deal, why is it important to consider the duration of a contract?
A. Longer contracts increase cash flow predictability.
B. Longer contracts increase flexibility on delivery timescales.
C. Shorter contracts increase leverage for negotiation.
A. Longer contracts increase cash flow predictability.
Explanation: The duration of a contract is one of the factors that affect the value of a deal, along with the price, terms, and conditions. Longer contracts can increase the cash flow predictability for both the seller and the buyer, as they reduce the uncertainty and variability of future payments and revenues. Longer contracts can also help build stronger and more loyal relationships with customers, as they demonstrate trust and commitment. On the other hand, shorter contracts can increase the risk of losing customers to competitors, as they offer more opportunities for switching or renegotiating. Shorter contracts can also create more pressure on the seller to deliver value quickly and consistently, as they have less time to prove their worth and earn customer satisfaction.