The adjustment for changes in operating working capital accounts depends in part on a firm's rate of growth.Rapidly growing firms usually experience significant increases in.
A)accounts receivable, only.
B)inventories, only.
C)accounts receivable and inventories.
D)neither accounts receivable, nor inventories.
E)none of the above

Question

Quizplus · Accepted Answer

Rapidly growing firms usually experience significant increases in both accounts receivable and inventories. As sales increase, accounts receivable increase because customers take longer to pay, and inventories increase because the firm must hold more inventory to meet the higher demand. Therefore, in order to adjust for these changes in operating working capital accounts, both accounts receivable and inventories must be considered.

The Adjustment for Changes in Operating Working Capital Accounts Depends