Which of the Following Statements Is CORRECT

question 38

Multiple Choice

Which of the following statements is CORRECT?

• A) When we use the AFN equation, we assume that the ratios of assets and liabilities to sales (A0*/S0 and L0*/S0) vary from year to year in a stable, predictable manner.
• B) When fixed assets are added in large, discrete units as a company grows, the assumption of constant ratios is more appropriate than if assets are relatively small and can be added in small increments as sales grow.
• C) Firms whose fixed assets are "lumpy" frequently have excess capacity, and this should be accounted for in the financial forecasting process.
• D) For a firm that uses lumpy assets, it is impossible to have small increases in sales without expanding fixed assets.
• E) Regression techniques cannot be used in situations where excess capacity or economies of scale exist.
• Multiple Choice: Problems

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Definitions:

Short Term

Relating to or occurring on a brief or immediate timescale, typically within a year or less.

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale.

Additional Risk

New or increased levels of exposure to potential loss or damage, which could impact an entity’s operations, finances, or reputation.

Transport Density

A measure of how much weight or volume of cargo is transported over a specific distance, often used in freight and logistics to plan and optimize transport loads.