Which of the Following Statements Is CORRECT

question 5

Multiple Choice

Which of the following statements is CORRECT?

• A) the afn equation for forecasting funds requirements requires only a forecast of the firm's balance sheet. although a forecasted income statement may help clarify the results, income statement data are not essential because funds needed relate only to the balance sheet.
• B) dividends are paid with cash taken from the accumulated retained earnings account, hence dividend policy does not affect the afn forecast.
• C) a negative afn indicates that retained earnings and spontaneous liabilities are far more than sufficient to finance the additional assets needed.
• D) if the ratios of assets to sales and spontaneous liabilities to sales do not remain constant, then the afn equation will provide more accurate forecasts than the forecasted financial statements method.
• E) any forecast of financial requirements involves determining how much money the firm will need, and this need is determined by adding together increases in assets and spontaneous liabilities and then subtracting operating income.

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Definitions:

Employee Stock Option Plans

Programs that offer employees the option to purchase company shares at a discounted price, aiming to align their interests with those of the company.

Stock Plan

An employee benefit plan in which staff have the opportunity to buy company shares, often at a discount or as part of compensation.

Stock Bonus Plan

A form of compensation given to employees, offering them shares in the company as part of their remuneration package.

Stock Gainsharing Plan

A compensation program where employees receive benefits based on the company's stock performance, usually in addition to their regular salaries.