Which of the Following Statements About the Financial Planning Process

question 46

Multiple Choice

Which of the following statements about the financial planning process is correct?

• A)The additional funds needed (AFN) is estimated by summing the expected changes in assets and liabilities that fluctuate with sales and then subtracting the expected operating income.
• B)The projected balance sheet method requires only the balance sheet to determine a firm's expected financial needs.
• C)The decision as to how a firm should raise additional funds needed (AFN) to meet its financial goals depends on the ability of the firm to handle additional debt, conditions in financial markets, and restrictions imposed by existing debt agreements.
• D)The projected balance sheet method of forecasting financial needs does not consider dividends paid to shareholders because these are after tax payments from retained earnings.
• E)Financial forecasts generally do not consider forecasts of the economic prospects for the nation and the industry because these are factors that are beyond the control of the firm.

Apply the matching principle to determine appropriate expense recognition.

Understand the requirements for reporting valuation changes in various liabilities and assets under both U.S. GAAP and IFRS.

Grasp the concept of other comprehensive income (OCI) and its reporting requirements.

Identify and differentiate between types of expenses and their recognition.

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Definitions:

Barbary Pirates

Pirates who operated from North Africa, based primarily in the ports of Algiers, Tunis, and Tripoli, known for capturing and enslaving European merchants and travelers in the Mediterranean from the 16th to the 19th centuries.

Lewis and Clark Expedition

A journey undertaken by Meriwether Lewis and William Clark from 1804 to 1806, across North America to explore the lands west of the Mississippi River acquired in the Louisiana Purchase.

Louisiana Purchase

The acquisition by the United States of America of over 800,000 square miles of territory from France in 1803, doubling the size of the nation.

Economic Potential

The capacity of a country, region, or sector to generate goods and services and grow its economy, influenced by resources, labor, technology, and innovation.