5.

Which of the following statements is correct?

A. a. Since accounts payable and accruals must eventually be paid, as these accounts increase, AFN also increases.

B. b. Suppose a firm is operating its fixed assets below 100 percent capacity but is at 100 percent with respect to current assets. If sales grow, the firm can offset the needed increase in current assets with its idle fixed assets capacity.

C. c. If a firm retains all of its earnings, then it will not need any additional funds to support sales growth.

D. d. Additional funds needed are typically raised from some combination of notes payable, long-term bonds, and common stock. These accounts are nonspontaneous in that they require an explicit financing decision to increase them.

E. e. All of the statements above are false.