Which of the Following Statements Is Correct

question 75

Multiple Choice

Which of the following statements is correct?

• A) Any forecast of financial requirements involves determining how much money the firm will need and is obtained by adding together increases in assets and spontaneous liabilities and subtracting operating income.
• B) The projected balance sheet method of forecasting financial needs requires only a forecast of the firm's balance sheet.Although a forecasted income statement helps clarify the financing needs,it is not essential to the balance sheet method.
• C) Because dividends are paid after taxes from retained earnings,dividends are not included in the projected balance sheet method of forecasting.
• D) The projected balance sheet method forces recognition of the fact that new financing creates additional financial obligations.For instance,new financing can increase expenses which can actually decrease taxes but increase the projected financial need.
• E) Financing feedback describes the effect on the firm's stock price of the announcement that the firm will sell new equity or debt to raise needed capital.

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Definitions:

Peak-Period Requirements

The highest level of resources, such as labor or raw materials, required to manage production or service delivery during periods of maximum demand.

Variable Cost

Costs that change in proportion to the level of production or business activity, including raw materials and labor expenses.

Fixed Cost

Expenses that remain unchanged regardless of the volume of goods or services produced within a certain range.

Trucking Department

A specialized unit or department within a company responsible for the management and operation of the fleet of trucks for transportation of goods.