Which of the Following Assumptions Is Embodied in the AFN

question 42

Multiple Choice

Which of the following assumptions is embodied in the AFN equation?

• A) Accounts payable and accruals are tied directly to sales.
• B) Common stock and long-term debt are tied directly to sales.
• C) Fixed assets, but not current assets, are tied directly to sales.
• D) Last year's total assets were not optimal for last year's sales.
• E) None of the firm's ratios will change.

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Definitions:

Voting Rights

The rights of shareholders to vote on company matters, such as electing directors or approving major corporate actions.

Consolidated Financial Statements

Financial statements that aggregate all the financial information of a parent company and its subsidiaries into one document.

Parent Company

A company that controls or owns more than half of another company's voting stock, making the latter a subsidiary.

Financial Statements

These are formal records of the financial activities and position of a business, person, or other entity, presenting the results of operations and financial condition.