Which of the Following Statements Is CORRECT

question 13

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) There are economies of scale in the use of many kinds of assets. When economies occur the ratios are likely to remain constant over time as the size of the firm increases. The Economic Ordering Quantity model for establishing inventory levels demonstrates this relationship.
• Problems

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Definitions:

Market System

In this economic order, the strategies for investment, production, and merchandise distribution are dictated by supply and demand trends, with a free-market policy guiding the pricing of all goods and services.

Economic Systems

The means by which countries or communities organize and distribute available resources, goods, and services across the economy.

North Korea

North Korea is a country in East Asia, officially known as the Democratic People's Republic of Korea, known for its authoritarian government and isolation from most of the international community.

South Korea

A country located in East Asia, known for its advanced technology sector, vibrant culture, and strong economy.