Which of the Following Statements Is CORRECT

question 44

Multiple Choice

Which of the following statements is CORRECT?

• A) The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales.
• B) Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management's historical performance is evaluated.
• C) The capital intensity ratio gives us an idea of the physical condition of the firm's fixed assets.
• D) The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists.
• E) Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings.

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Definitions:

Net Cash Provided

The total amount of cash generated by a company's operating activities in a specific period, reflecting its ability to generate cash from its core business.

Inventory Account

An account in the financial statements that represents the value of goods a company has in stock, either finished goods, work in progress, or raw materials.

Operating Activities

Transactions and events that relate to the main activities of a company, typically including cash inflows and outflows from sales and expenses.

Net Cash Provided

The net amount of cash generated by an organization's operating, investing, and financing activities within a specific period.