Which of the Following Statements Is CORRECT

question 23

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.

---

Definitions:

Damages

Monetary compensation awarded by a court to a party who has suffered loss or harm due to the wrongful act or negligence of another.

Fraud

An intentional deception made for personal gain or to damage another individual.

Misrepresentation

A false statement of fact made by one party to another, which, while inducing that party to enter into a contract, leads to its breach.

Misleading Statement

False or deceptive information that can lead someone to an incorrect understanding or belief.