When Market Price Increases, Producer Surplus Increases Because (1) Producer

question 9

True/False

When market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases and (2) new sellers enter the market.

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Definitions:

Long-term Debt

Borrowings or financial obligations that are due to be repaid over a period longer than one year.

Pro Forma Financial Statements

Financial statements based on hypothetical scenarios or assumptions about the future of a business.

Spontaneously Generated Funds

Funds generated if a liability account increases spontaneously (automatically) as sales increase. An increase in a liability account is a source of funds; thus, funds have been generated. Two examples of spontaneous liability accounts are accounts payable and accrued wages. Note that notes payable, although a current liability account, is not a spontaneous source of funds since an increase in notes payable requires a specific action between the firm and a creditor.

AFN Formula

Additional Funds Needed formula, a financial tool used to estimate the additional amount of financing a firm will require in the future.