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 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 management's historical performance is evaluated.
D) The capital intensity ratio gives us an idea of the physical condition of the firm's fixed assets.
E) The AFN equation produces more accurate forecasts than the forecasted financial statement method,especially if fixed assets are lumpy and economies of scale exist.

Question

Quizplus · Accepted Answer

Forecasting future sales is critical because it serves as the basis for determining the firm's future financial requirements, which then lead to the development of forecasted financial statements. The other statements are either incorrect or incomplete.

Which of the Following Statements Is CORRECT