(17-5) Forecasting Financial Reqs

question 18

Multiple Choice

(17-5) Forecasting financial reqs. C K Answer: c MEDIUM/

• A) When we use the AFN equation, we assume that the ratios of assets and liabilities to sales (A*0/S0 and L*0/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.

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Definitions:

Crowdfunded Projects

Initiatives or ventures funded by raising small amounts of money from a large number of people, typically via online platforms.

Kickstarter

A crowdfunding platform designed to help bring creative projects to life by allowing creators to seek financial support from the public.

Crowdfunding Efforts

Initiatives taken to raise funds for a project or venture by soliciting small contributions from a large number of people, typically via the internet.

Bootstrapping

A self-funding approach wherein an entrepreneur starts a company with personal finances or the revenue generated by the business, rather than external investment.