Which of the Following Statements Is CORRECT

question 12

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:

Mortality Rates

A measure of the number of deaths in a specified population, scaled to the size of that population per unit of time.

Cancer

A group of diseases involving abnormal cell growth with the potential to invade or spread to other parts of the body, characterized by uncontrolled division of cells.

Benign Tumors

Non-cancerous growths that do not invade nearby tissues or spread to other parts of the body.

Metastasize

The process by which cancer cells spread from the place where they first formed to another part of the body.