Which of the following statements about Virtual Con’s securitization of receivables is least accurate?
a. Accelerates operating cash flow into the current period.
b. Enables the firm to reclassify financing cash flow as operating cash flow.
c. Could allow the firm to recognize a reduction in operating expenses.

Laura Bond is a Senior VP of Media Invests Partners (MIP), a late-stage venture capital firm. MIP is considering an investment in Virtual Con Corp. Virtual Con went public during the dot-com boom, and it currently trades at a small fraction of its IPO value; however, its recent financial statements have shown improvement.
Harry Darling, a former employee of MIP and current Virtual Con board member, thinks that Virtual Con is an excellent candidate to take private. He has presented the idea to MIP’s board, pointing out the rising operating cash flows. Ms. Bond has the highest regard for Mr. Darling, but she remains dubious about his assessment of Virtual Con. She has come across several items in the footnotes to the financial statements that have raised concerns.
Ms. Bond noticed that six months ago Virtual Con created a special-purpose entity (SPE) to securitize its receivables. The firm sold off $12 million of its accounts receivable in those two quarters, which represented 80 percent of those outstanding and more than five months of revenue. She notes that a change in the default rate assumption and the discount rate at the time of sale caused the fair value of the receivables to exceed book value by $3.8 million, which Virtual Con booked as revenue.
Mr. Darling also points out, “Virtual Con has become more active in managing its accounts payable. It set up a financial arrangement with its principal bank so the bank makes payments to Virtual Con’s suppliers on its behalf, and Virtual Con has 90 days to pay the bank. The suppliers are more willing to do business with Virtual Con because they have the assurance of being paid by the bank.”