Which of the Following Assumptions Is Embodied in the AFN

question 30

Multiple Choice

Which of the following assumptions is embodied in the AFN equation?

• A) None of the firm's ratios will change.
• B) Accounts payable and accruals are tied directly to sales.
• C) Common stock and long-term debt are tied directly to sales.
• D) Fixed assets, but not current assets, are tied directly to sales.
• E) Last year's total assets were not optimal for last year's sales.

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Definitions:

Issue Debt

The process by which a government, corporation, or other entity raises funds by selling bonds, bills, or other forms of debt instruments.

Working Capital Management

The process of managing the short-term assets and liabilities to ensure a company can continue its operations and meet its financial obligations.