Which of the Following Statements Is CORRECT

question 27

Multiple Choice

Which of the following statements is CORRECT?

• A) Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings.
• B) The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales.
• C) Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management's historical performance is evaluated.
• D) The capital intensity ratio gives us an idea of the physical condition of the firm's fixed assets.
• E) The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists.

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Definitions:

Federal Reserve Note

The official paper currency of the United States, issued by the Federal Reserve, and the most common form of U.S. banknotes in circulation.

Token Money

Money whose face value exceeds its cost of production, typically involving coins and paper money not backed by a commodity.

Legal Tender

The coins or banknotes that must be accepted if offered in payment of a debt.

Debit Cards

Plastic cards issued by banks that allow cardholders to transfer money electronically from their bank account when making a purchase.