Final answer:
After the second step in the Operating Cycle, a firm typically possesses Inventory. This phase occurs after purchasing the inventory and before selling it to generate sales, potentially leading to Accounts Receivable.
Step-by-step explanation:
After the second step in the Operating Cycle of a firm, the company typically has Inventory. The Operating Cycle is the time it takes a company to purchase inventory, sell products, and collect cash from customers. The second step, where the company still has inventory, is after the firm has purchased goods that will be sold (first step) and before it has converted that inventory into sales (third step).
The typical stages of the Operating Cycle are as follows:
- Purchasing inventory with cash.
- Holding the inventory until it can be sold to customers.
- Selling the inventory to generate sales, usually leading to having Accounts Receivable (if sales are made on credit).
- Collecting the Accounts Receivable to have cash again, completing the cycle.
Therefore, the correct answer is C) Inventory, as the inventory has been purchased but not yet sold to customers. Once the inventory is sold, usually the company will have Accounts Receivable if the sales are done on credit, leading then to the final step to collect cash.