Which of the following assumptions is embodied in the AFN equation?
A) Accounts payable and accruals are tied directly to sales.
B) Common stock and long-term debt are tied directly to sales.
C) Fixed assets, but not current assets, are tied directly to sales.
D) Last year's total assets were not optimal for last year's sales.
E) None of the firm's ratios will change.

Question

Quizplus · Accepted Answer

Accounts payable and accruals are often assumed to vary directly with sales in the AFN equation, as they are part of the spontaneous liabilities that increase with sales.

Which of the Following Assumptions Is Embodied in the AFN