1) All else equal, which of the following is likely to increase a company's additional funds needed (AFN)?
a. An increase in its dividend payout ratio.
b. The company has a lot of excess capacity.
c. Accounts payable increase faster than sales.
d. All of the statements above are correct.
e. None of the statements above is correct.
2) Additional funds needed are best defined as:
a. Funds that are obtained automatically from routine business transactions.
b. Funds that a firm must raise externally through borrowing or by selling new common or preferred stock.
c. The amount of assets required per dollar of sales.
d. The amount of cash generated in a given year minus the amount of cash needed to finance the additional capital expenditures and working capital needed to support the firm's growth.
e. A forecasting approach in which the forecasted percentage of sales for each item is held constant.
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