Question
Which of the following statements is(are) correct regarding the Additional Funds Needed (AFN) formula method? A) The AFN method assumes that the firm will require
Which of the following statements is(are) correct regarding the Additional Funds Needed (AFN) formula method?
A) The AFN method assumes that the firm will require increasing amounts of assets for each dollar of sales, i.e. a higher capital intensity ratio, in the forecast period as compared to its most recent year.
B) The AFN formula method assumes that the firm will generate the same amount of spontaneous liabilities for each dollar of sales in the forecast period as it had in its most recent year.
C) The AFN formula method assumes that the firm will continue to have the same profit margin and dividend payout ratio in the forecast period as it had in its most recent year.
D) If the AFN indicates that surplus funding is available, these funds should be used to purchase additional operating assets for the firm in the forecast period.
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