Which of the Following Statements Is CORRECT

question 27

Multiple Choice

Which of the following statements is CORRECT?

• A) Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings.
• B) The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales.
• C) Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management's historical performance is evaluated.
• D) The capital intensity ratio gives us an idea of the physical condition of the firm's fixed assets.
• E) The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists.

---

Definitions:

ADH

Antidiuretic hormone, also known as vasopressin, a hormone that regulates the body's retention of water by increasing the concentration of water in the blood.

Urine Osmolality

A measure of the concentration of solutes in urine, which can provide insight into the body's water balance and kidney function.

Urine Volume

The total amount of urine excreted by the kidneys over a specified period, an important indicator of kidney and overall fluid balance.

ADH

Antidiuretic hormone, also known as vasopressin, which helps regulate water balance in the body by increasing the uptake of water in the kidneys.