If a Firm's Net Income Is Positive and Its Noncash

question 8

Multiple Choice

If a firm's net income is positive and its noncash expenses are positive,which of the following could account for a negative amount of cash provided by operations?

• A) Current assets decrease more than current liabilities decrease.
• B) Current assets increase more than current liabilities increase.
• C) Current assets decrease more than current liabilities increase.
• D) A large addition is made to plant and equipment.

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Definitions:

Flip-Over Provision

This provision is a defensive strategy used by companies in their shareholder rights plans to deter hostile takeovers, allowing shareholders to buy shares of the acquirer at a discount after the takeover.

White Knight

A friendly investor or company that acquires a corporation at fair consideration, often to prevent a hostile takeover.

Unfriendly Suitor

A company or individual that makes a takeover attempt on another company without the consent or cooperation of the target company’s management.

Golden Parachute

A contract provision that gives a company's executives significant benefits if they are terminated as a result of a merger or takeover.