Which of the following affects cash flow with floating rates?

The correct answer regarding which factor affects cash flow with floating rates is market rate increases. Floating interest rates are tied to a benchmark rate, which means that when the market rates increase, the interest expenses associated with floating rate loans or financial products correspondingly rise. This increase in interest payments leads to a higher cost of servicing debt, thus reducing available cash flow.

In a financial management context, it's crucial to recognize how changes in market conditions directly influence those costs, thereby impacting overall financial strategy and liquidity management. Borrowers with floating rate obligations must be aware of the risks associated with potential rising rates, as this can create fluctuations in their financial forecasts and necessitate adjustments in budgeting or financial planning.

On the other hand, fixed repayment terms do not fluctuate and thereby maintain a consistent cash outflow regardless of market conditions. Stable existing rates imply that there is no change to cash flow from existing loans, while stating that there is no impact from economic fluctuations suggests a scenario that does not accurately reflect real-world financial dynamics, where economic changes do indeed influence cash flow.