Which of the Following Statements Is CORRECT

question 23

Multiple Choice

Which of the following statements is CORRECT?

• A) When we use the AFN equation,we assume that the ratios of assets and liabilities to sales (A₀^*/S₀ and L₀^*/S₀)vary from year to year in a stable,predictable manner.
• B) When fixed assets are added in large,discrete units as a company grows,the assumption of constant ratios is more appropriate than if assets are relatively small and can be added in small increments as sales grow.
• C) Firms whose fixed assets are "lumpy" frequently have excess capacity,and this should be accounted for in the financial forecasting process.
• D) For a firm that uses lumpy assets,it is impossible to have small increases in sales without expanding fixed assets.
• E) Regression techniques cannot be used in situations where excess capacity or economies of scale exist.

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Definitions:

Voidable Contract

A valid agreement that one or more parties can legally cancel if they choose, due to reasons such as fraud or lack of capacity to consent.

Material Misrepresentation

False or misleading statements that significantly affect another party's decision in a transaction.

Reasonable Person

A hypothetical individual in the legal system who exercises average care, skill, and judgment in conduct and is used as a standard to assess behavior.

Duress By Physical Force

The use of physical force or threats to compel someone to act against their will or to consent to an agreement.