Which of the Following Statements Is Correct

question 48

Multiple Choice

Which of the following statements is correct?

• A) Any forecast of financial requirements involves determining how much money the firm will need and is obtained by adding together increases in assets and spontaneous liabilities and subtracting operating income.
• B) The projected statement of financial position method of forecasting financial needs requires only a forecast of the firm's statement of financial position.Although a forecasted statement of comprehensive income helps clarify the financing needs, it is not essential to the statement of financial position method.
• C) Because dividends are paid after taxes from retained earnings, dividends are not included in the projected statement of financial position method of forecasting.
• D) The projected statement of financial position method forces recognition of the fact that new financing creates additional financial obligations.For instance, new financing can increase expenses which can actually decrease taxes but increase the projected financial need.
• E) Financing feedback describes the effect on the firm's share price on the announcement that the firm will sell new equity or debt to raise needed capital.

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Definitions:

Average Fixed Cost

The fixed costs of production (e.g., rent, salaries) divided by the quantity of output produced; these costs decline as production increases.

Average Variable Cost

Total variable costs divided by the quantity of output, showing the variable cost per unit of output.

Marginal Cost

The price to produce an additional unit of a product or service.

Total Costs

The total expense of manufacturing that encompasses all constant and fluctuating costs.