Which of the following statements is CORRECT?
A. Any forecast of financial requirements involves determining how much money the firm will need, and this need is determined by adding together increases in assets and spontaneous liabilities and then subtracting operating income.
B. The AFN equation for forecasting funds requirements requires only a forecast of the firm's balance sheet. Although a forecasted income statement may help clarify the results, income statement data are not essential because funds needed relate only to the balance sheet.
C. Dividends are paid with cash taken from the accumulated retained earnings account, hence dividend policy does not affect the AFN forecast.
D. A negative AFN indicates that retained earnings and spontaneous capital are far more than sufficient to finance the additional assets needed.
E. If assets and spontaneously generated liabilities are not projected to grow at the same rate as sales, then the AFN method will provide more accurate forecasts than the projected financial statement method.
Answer: D
You might also like to view...
In the accounting cycle, closing entries are prepared before adjusting entries
Indicate whether the statement is true or false
Mark was refused employment at a Christian bookstore because he was not a "born-again Christian." If Mark brings a Title VII action against the bookstore, the bookstore's best defense would be
a. it did not discriminate against a protected category. b. Title VII doesn't apply to private businesses. c. being a "born-again Christian" is a bona fide occupational qualification. d. it could not reasonably accommodate Mark.
Women who rent their wedding gowns instead of buying them and wearing them only once are taking advantage of ________ utility.
A. price B. time C. form D. possession E. place
The beta of a portfolio
A) does not change over time. B) is irrelevant, only the betas of the individual assets are important. C) is the weighted average of the betas of the individual assets in the portfolio. D) is the sum of the betas of all assets in the portfolio.