iLearn : MBA_602N_700_16F : Tests & Quizzes

Which of the following statements is correct?

• A. a. Suppose economies of scale exist in a firm's use of assets. Under this condition, the firm should use the regression method of forecasting asset requirements rather than the percent of sales method.
• B. b. If a firm must acquire assets in lumpy units, it can avoid errors in forecasts of its need for funds by using the linear regression method of forecasting asset requirements because all the points will lie on the regression line.
• C. c. If economies of scale in the use of assets exist, then the AFN formula rather than the percent of sales method should be used to forecast additional funds requirements.
• D. d. Notes payable to banks are included in the AFN formula, along with a projection of retained earnings.
• E. e. One problem with the AFN formula is that it does not take account of the firm's dividend policy.