Which of the Following Statements Is Correct

question 75

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 balance sheet method of forecasting financial needs requires only a forecast of the firm's balance sheet.Although a forecasted income statement helps clarify the financing needs,it is not essential to the balance sheet method.
• C) Because dividends are paid after taxes from retained earnings,dividends are not included in the projected balance sheet method of forecasting.
• D) The projected balance sheet 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 stock price of the announcement that the firm will sell new equity or debt to raise needed capital.

---

Definitions:

Factor Analysis

A statistical method used to identify underlying variables, or factors, that explain the pattern of correlations among multiple observed measures.

Empirically Derived Testing

A method of creating assessment tools based on data collected from experiments or observations, as opposed to theory-based methods.

Projective Testing

A psychological assessment tool that uses ambiguous stimuli to elicit responses that reveal aspects of an individual’s personality.

Personality Trait

enduring characteristics or qualities that describe an individual's behavior across different situations.