The AFN Equation Assumes That the Ratios of Assets and Liabilities

question 34

True/False

The AFN equation assumes that the ratios of assets and liabilities to sales remain constant over time.However, this assumption can be relaxed when we use the forecasted financial statement method.Three conditions where constant ratios cannot be assumed are economies of scale, lumpy assets, and excess capacity.

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Definitions:

Imagination Inflation

The phenomenon where vividly imagining an event can increase confidence that the event actually occurred in the past.

Source Amnesia

An issue where an individual is unable to remember the situation, including when and where, in which they learned something, yet the factual knowledge remains intact.

Proactive Interference

The phenomenon where old information hinders the ability to learn or remember new information.

Implicit Memory

A type of memory that involves unconscious retention and influences behavior without conscious awareness.