Which of the following statements is correct? A. If assets and spontaneously generated liabilities are not projected to grow at the same rate as sales, then the AFN method will provide more accurate forecasts than the projected financial statement method. 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 capital are far more than sufficient to finance the additional assets needed. D. AFN is defined as the funds that a firm must raise internally. E. 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.
Which of the following statements is correct? A. If assets and spontaneously generated liabilities are not projected to grow at the same rate as sales, then the AFN method will provide more accurate forecasts than the projected financial statement method. 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 capital are far more than sufficient to finance the additional assets needed. D. AFN is defined as the funds that a firm must raise internally. E. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Which of the following statements is correct?
A. If assets and spontaneously generated liabilities are not projected to grow at the same rate as sales, then the AFN method will provide more accurate forecasts than the projected financial statement method.
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 capital are far more than sufficient to finance the additional assets needed.
D. AFN is defined as the funds that a firm must raise internally.
E. 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.
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