AFN Equation Assumes That the Ratios of Assets and Liabilities

question 27

True/False

AFN equation assumes that the ratios of assets and liabilities to sales remain constant over time However, this assumption can be relaxed when we use the forecasted financial statement method Three conditions where constant ratios cannot be assumed are economies of scale, lumpy assets, and excess capacity.

---

Definitions:

Closed-Loop System

A system that uses feedback to control the state or output of the system. It is designed to automatically adjust, correct, or compensate for changes to maintain the desired output.

Disintermediation

The removal of intermediaries in the supply chain, allowing producers to sell directly to consumers.

Delivery Of Products

The process of transporting goods from a seller to the purchaser’s location or making them available for collection.

Intermediaries

Entities that act as middlemen in the distribution chain between producers and consumers or between different businesses.