Which of the Following Assumptions Is Embodied in the AFN

question 30

Multiple Choice

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

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

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Definitions:

Actual Price

The real price at which a transaction occurs, distinct from list or estimated prices, reflecting the amount paid or received in a transaction.

Standard Price

A predetermined cost attributed to materials, labor, and overhead to facilitate budgeting and variance analysis.

Efficiency Standard

A benchmark for measuring the optimal use of resources in the production of goods or the delivery of services.

100% Efficiency

A theoretical situation where all resources are utilized to their maximum capacity without any waste, often used as a benchmark or target in productivity and operations management.