What can low revenues indicate for a firm?

Low revenues can indicate that a firm is struggling to generate enough income from its operations to cover its costs. If a business consistently earns revenues that are lower than the total costs it incurs, it risks reaching a point where it can no longer sustain itself financially, potentially leading to insolvency or going out of business. This is a critical situation for any firm, as it directly affects their ability to pay for fixed and variable expenses, such as wages, rent, and materials.

In contrast, options suggesting that a firm is likely to expand its operations or has high investor confidence are less likely to be true in the context of low revenues. Expansion typically requires sufficient capital and healthy revenue streams to finance new projects or product lines. Likewise, high investor confidence usually correlates with strong financial performance, not low revenues. Experiencing high demand would generally imply increasing revenues, not reduced ones, as high sales typically lead to higher income for a firm. Thus, the correct choice accurately reflects the potential consequences of low revenues on a firm's financial viability.