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:

SUTA

State Unemployment Tax Act; a type of payroll tax that employers must pay to the state government to fund unemployment benefits.

FICA-OASDI

The Federal Insurance Contributions Act component for Old-Age, Survivors, and Disability Insurance, a payroll tax paid by employers and employees to fund Social Security.

FUTA

The Federal Unemployment Tax Act, a United States federal law that imposes a payroll tax on any business with employees for the purpose of funding state workforce agencies.

SUTA

State Unemployment Tax Act, which mandates employers to pay state unemployment taxes.