A. a. Any forecast of financial requirements involves determining how much money the firm will…

A. a. Any forecast of financial requirements involves determining how much money the firm will need and is obtained by adding together increases in assets and spontaneous liabilities and subtracting operating income.

B. b. The percentage of sales method of forecasting financial needs requires only a forecast of the firm’s balance sheet. Although a forecasted income statement helps clarify the need, it is not essential to the percentage of sales method.

C. c. Because dividends are paid after taxes from retained earnings, dividends are not included in the percentage of sales method of forecasting.

D. d. Financing feedbacks describe the fact that interest must be paid on the debt used to help finance AFN and dividends must be paid on the shares issued to raise the equity part of the AFN. These payments would lower the net income and retained earnings shown in the projected financial statements.

E. e. All of the statements above are false.