Which of the Following Statements Is Correct

question 30

Multiple Choice

Which of the following statements is correct?

• A)Since accounts payable and accrued liabilities must eventually be paid off, as these accounts increase, AFN as calculated by the AFN equation must also increase.
• B)Suppose a firm is operating its fixed assets at below 100% of capacity, but it has no excess current assets. Based on the AFN equation, its AFN will be larger than if it had been operating with excess capacity in both fixed and current assets.
• C)If a firm retains all of its earnings, then it cannot require any additional funds to support sales growth.
• D)Additional funds needed (AFN) are typically raised using a combination of notes payable, long-term debt, and common stock. Such funds are nonspontaneous in the sense that they require explicit financing decisions to obtain them.

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Definitions:

Least Squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of squares of the differences between observed and predicted values.

Cost Estimation

The process of predicting the amount of resources, especially financial, required to complete a project or product development within specified constraints.

Scatter Diagram

A graphical representation used to show the relationship between two variables, helping to identify potential correlations.

Relevant Range

The range of activity within which the assumptions made about cost behavior in cost-volume-profit analysis are valid.