Which of the Following Assumptions Is Embodied in the AFN

question 42

Multiple Choice

Which of the following assumptions is embodied in the AFN equation?

• A) Accounts payable and accruals are tied directly to sales.
• B) Common stock and long-term debt are tied directly to sales.
• C) Fixed assets, but not current assets, are tied directly to sales.
• D) Last year's total assets were not optimal for last year's sales.
• E) None of the firm's ratios will change.

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Definitions:

Rate of Return

The built-up gain or incurred loss on an investment over a determined timeframe, expressed as a fraction of the cost of investment.

Share

A unit of ownership in a corporation or financial asset, giving holders a proportion of the company's profits and voting rights.

Bank Account

A financial account maintained by a bank for a customer, allowing for the deposit and withdrawal of funds and earning of interest.

Annual Withdrawals

The amount of money taken from an account or investment over the course of a year.