Question : 21. The adjustment for changes in operating working capital accounts depends : 1230443

21. The adjustment for changes in operating working capital accounts depends in part on a firm’s rate of growth. _____ firms usually experience significant increases in accounts receivable and inventories.   
A. Introduction phase
B. Late maturity
C. Declining
D. Mature
E. Rapidly growing

22. The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations depends on the nature of its operations.  Some firms use _____ to finance the working capital needs.  
A. suppliers
B. equity financing
C. short-term borrowing
D. long-term borrowing
E. all of the above

23. The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities. During the _____ cash outflow exceeds cash inflow from operations because operations are not yet earning profits while the firm must invest in accounts receivable and inventories. Investing activities result in a net cash outflow to build productive capacity. Firms must rely on external financing during this phase to overcome the negative cash flow from operations and investing.  
A. introduction phase
B. growth phase
C. mature phase
D. late maturity phase
E. decline phase

24. The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities. The _____ phase reflects sales of successful products, and net income turns positive. The firm makes more sales, but it also needs to acquire more goods to sell. Because it usually must pay for the goods it acquires before it collects for the goods it sells, the firm finds itself often short of cash from operations. The faster it grows (even though profitable), the more cash it needs. Banks do not like to lend for such needs. They view such needs (even though for current assets) as a permanent part of the firm’s financing needs. Thus, banks want firms to use shareholders’ equity or long-term debt to finance growth in nonseasonal inventories and receivables.  
A. introduction
B. growth
C. mature
D. late maturity
E. decline

25. The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities. During the _____, net income usually reaches a peak, and working capital stops growing. Operations generate positive cash flow, enough to finance expenditures on property, plant, and equipment. Capital expenditures usually maintain, rather than increase, productive capacity. Firms use the excess cash flow to repay borrowing from the introduction and growth phases and to begin paying dividends to shareholders.  
A. introduction phase
B. growth phase
C. mature phase
D. late maturity phase
E. decline phase

26. The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities. During the _____, weakening profitability—from reduced sales or reduced profit margins on existing sales— signals the beginning of the phase, but ever-declining accounts receivable and inventories can produce positive cash flow from operations. In addition, sales of unneeded property, plant, and equipment can result in positive cash flow from investing activities. Firms can use the excess cash flow to repay remaining debt or diversify into other areas of business.  
A. introduction phase
B. growth phase
C. mature phase
D. late maturity phase
E. decline phase

27. The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities. Biotechnology firms are in their _____ phase, consumer foods companies are in their _____ phase, and U.S. auto manufacturers are in the _____ phase. 
A. introduction; late maturity or the decline; growth
B. growth; mature; late maturity or the decline
C. mature; late maturity or the decline; growth
D. late maturity or the decline; growth; introduction
E. introduction; late maturity or the decline; mature

28. Firms engage in transactions involving derivatives. For the most part, the complex parts of these transactions occur _____, but those transactions do _____ until, possibly, their settlement.  
A. after the firm has acquired the derivative; not affect cash flows
B. before the firm has acquired the derivative; not affect cash flows
C. when the firm has acquired the derivative; not affect cash flows
D. after the firm has acquired the derivative; not affect net income
E. before the firm has acquired the derivative; not affect net income

29. Which of the following is/are true? 
A. Most derivative acquisitions represent marketable securities held as current assets.
B. The cash flow from operations section shows a subtraction for the increase in the current asset accounts in an amount equal to the firm’s expenditure to acquire the derivative.
C. If the firm classifies the derivative as a nonoperating asset, then the cash outflow appears in the investing section of the statement of cash flows.
D. Subsequent to acquisition, the firm may report changes in the fair value of the derivative in income.
E. all of the above

30. Which of the following is/are not true? 
A. Most derivative acquisitions represent marketable securities held as current assets.
B. The cash flow from operations section shows a subtraction for the increase in the current asset accounts in an amount equal to the firm’s expenditure to acquire the derivative.
C. If the firm classifies the derivative as a nonoperating asset, then the cash outflow appears in the investing section of the statement of cash flows.
D. Subsequent to acquisition, the firm may report changes in the fair value of the derivative in income.
E. Firms engage in transactions involving derivatives and for the most part, the complex parts of these transactions occur before the firm has acquired the derivative.