Danielle's Sushi Shop Last Year Had (1) a Negative Net

question 13

Multiple Choice

Danielle's Sushi Shop last year had (1) a negative net cash flow from operations, (2) a negative free cash flow, and (3) an increase in cash as reported on its balance sheet. Which of the following factors could explain this situation?

• A) the company had a sharp increase in its depreciation and amortization expenses.
• B) the company had a sharp increase in its inventories.
• C) the company had a sharp increase in its accrued liabilities.
• D) the company sold a new issue of common stock.
• E) the company made a large capital investment early in the year.

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Definitions:

Variable Costs

Expenses that change in proportion to the amount of goods produced or the extent of services rendered.

Sales Quantity

The total number of units of a product sold in a particular period.

Fixed Costs

Expenses that are constant in total, regardless of changes in the volume of activity within a relevant period.

Total Fixed Cost

Total fixed cost is an accounting term describing the sum of all expenses within a company that do not change with the level of production or sales, such as rent, salaries, and insurance.