Question
Which of the following statements is CORRECT? a. Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common
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a. | Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings. | |||||||
b. | The first, and perhaps the most critical step in forecasting financial requirements is to forecast future sales. | |||||||
c. | Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where managements historical performance is evaluated. | |||||||
d. | The capital intensity ratio gives us an idea of the physical condition of the firms fixed assets. | |||||||
e. | The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists. | |||||||
Answer both sub-questions:
4-1. Which one is right (4 points)?
4-2. What is wrong for each other (4x2=8 points)?
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