Michael's company purchases special equipment from Switzerland that can produce very thin plastic parts with very low rejections.Michael forecasts a continual increase in sales.According to the Asset-to-Sales Financing Relationship,what will be the result of Michael's forecast?
A) investment from owners will be required
B) dividend distributions will increases
C) more equipment will have to be purchased
D) labour costs per unit of product will decrease

Question

Quizplus · Accepted Answer

According to the Asset-to-Sales Financing Relationship, as sales increase, the need for additional assets also increases. Therefore, Michael's forecast of a continual increase in sales would result in the need for more equipment to be purchased to meet the demand.

Michael's Company Purchases Special Equipment from Switzerland That Can Produce