Which of the Following Assumptions Is Embodied in the AFN

question 39

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:

Check Amount

The check amount is the sum of money written on a check that the drawer directs the bank to pay the payee.

Postdated Check

A postdated check is a check written with a future date, indicating when it can be deposited or cashed.

Insufficient Funds

A situation where an account does not have enough money to cover a transaction, resulting in rejection or fees.

Dishonored Check

A check that a bank refuses to honor or pay because the account holder does not have sufficient funds.