Which of the Following Statements Is CORRECT

question 40

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:

Income

The financial return or earnings, including wages, salaries, benefits, and investment returns, received by an individual or household over a period of time.

Nuts

Edible seeds encased in a hard shell, often consumed as a snack or used as an ingredient in various dishes.

Berries

Fruits that are characterized by their soft texture and seed-containing interior; commonly consumed fresh or in various culinary preparations.

Utility Function

A mathematical representation of how different bundles of goods or services are ranked in terms of their utility or satisfaction to a consumer.