The most recent comparative balance sheet of Giacomelli Corporation appears below: Which of the following classifications of cha
nges in balance sheet accounts as sources and uses is correct? Select one: a. The change in Accounts Payable is a source; The change in Accrued Wages and Salaries payable is a use b. The change in Accounts Payable is a use; The change in Accrued Wages and Salaries payable is a use c. The change in Accounts Payable is a source; The change in Accrued Wages and Salaries payable is a source d. The change in Accounts Payable is a use; The change in Accrued Wages and Salaries payable is a source
The correct option is B: "The change in Accounts Receivable is a source; The change in Inventory is a use"
Explanation:
However, you will need to look at the asset section as well in order to determine the correct response to this question statement. Depending on how the accounts receivable and inventory changes, you will be able to ascertain which is a source and which is a use. For instance, if the balance in Accounts Receivable and the Inventory has increased, the change is a use. And vice versa.
Smaller companies with smaller production processes have higher per unit costs than larger companies. - smaller firms find it harder to adopt economies of scale to reduce costs.
Over time, a firm takes control of 85% of the world’s supply of a chemical used in the production of plastic. - the firm has almost total control over a scarce resource, and new competitors have to scramble for the remaning 15%. (note: this is a natural barrier to entry as long as the pharmaceutical company did not collude with the government to reach such a high market share, in said case, it would be an artificial barrier to entry).
Lenders are hesitant to provide funding for new firms that will compete with a large, well-established firm. - a small firm may lack market credibility in the financial markets, because investors are hesitant about the future of the company, or do not expect high rates of return.
