The Term "Additional Funds Needed (AFN)" Is Generally Defined as Follows

question 26

Multiple Choice

The term "additional funds needed (AFN) " is generally defined as follows:

• A) Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations.
• B) The amount of assets required per dollar of sales.
• C) The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.
• D) A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.
• E) Funds that are obtained automatically from routine business transactions.

Comprehend the at-risk rules and how they impact the deductibility of losses.

Recognize the tax implications of depreciation adjustments for both regular tax purposes and AMT.

Appreciate the concept of tax preference items and their effect on AMT.

Understand the application and impact of passive activity loss rules.

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Definitions:

Chronic

Relating to illnesses or conditions persisting for a long time or constantly recurring.

Intermittent

Occurring at irregular intervals; not continuous or steady.

Generalized Anxiety Disorder

A mental health disorder characterized by persistent and excessive worry about various aspects of life, not limited to one specific issue.

Constant Worry

A persistent state of anxiety where an individual is often overly concerned about a variety of issues beyond their control.