The Extent to Which a Firm Adjusts Net Income for Changes

question 13

Multiple Choice

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. _____ usually show an addback for deferred tax expense, whereas firms that _____ show a subtraction.

• A)Rapidly growing firms; have operating losses
• B)Firms that have operating losses; are profitable
• C)Profitable firms; have operating losses
• D)Firms that stop growing or that shrink; rapidly growing firms
• E)Rapidly growing firms; stop growing or that shrink

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Definitions:

Marginal Utility

The increased utility or satisfaction derived by a buyer from the consumption of one extra unit of a good or service.

Income Effect

The fluctuation in income for either an individual or the economy and its influence on the demand levels for certain goods or services.

Substitution Effect

The economic principle that as prices rise, consumers will replace more expensive items with less costly alternatives.

Marginal Utility

The extra contentment a customer obtains by using an additional unit of a product or service.