In which of the following situations will Firm A require greater amounts of external funding (additional funds needed, AFN) to meet its forecasted growth than Firm B? Assume the firms are identical in every other way.
A)Firm A operates at full capacity, whereas Firm B does not.
B)Firm A uses the projected balance sheet method to forecast its pro forms financial statements, whereas Firm B does not.
C)Firm A generates substantial amounts of spontaneously generated funds, whereas Frim B generates very little.
D)Firm A has attained substantial economies of scale, whereas Firm B has not.
E)Firm A operates close to its operating breakeven point, whereas Firm B operates well above its operating breakeven point.

Question

In which of the following situations will Firm A require greater amounts of external funding (additional funds needed, AFN) to meet its forecasted growth than Firm B? Assume the firms are identical in every other way. 
A)Firm A operates at full capacity, whereas Firm B does not.
B)Firm A uses the projected balance sheet method to forecast its pro forms financial statements, whereas Firm B does not.
C)Firm A generates substantial amounts of spontaneously generated funds, whereas Frim B generates very little.
D)Firm A has attained substantial economies of scale, whereas Firm B has not.
E)Firm A operates close to its operating breakeven point, whereas Firm B operates well above its operating breakeven point.

Quizplus · Accepted Answer

If Firm A operates at full capacity, it will need more external funding to expand its operations to meet forecasted growth compared to Firm B, which has unused capacity and can grow without significant additional investment.

In Which of the Following Situations Will Firm a Require