FMarston, Inc

question 8

Multiple Choice

F.Marston, Inc.has developed a forecasting model to estimate its AFN for the upcoming year.All else being equal, which of the following factors is most likely to lead to an increase of the additional funds needed (AFN) ?

• A) A switch to a just-in-time inventory system and outsourcing production.
• B) The company reduces its dividend payout ratio.
• C) The company switches its materials purchases to a supplier that offers a longer credit period (with all other terms held equal).
• D) The company discovers that it has excess capacity in its fixed assets.
• E) A sharp increase in its forecasted sales.

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Definitions:

Purely Competitive

An idealized market structure in which there are many buyers and sellers, no barriers to entry or exit, and perfect information, leading to prices being determined by supply and demand.

Market Supply Curve

A graphical representation showing the total quantity of a good that sellers are willing and able to sell at various prices, holding all else constant.

Purely Competitive

A market structure characterized by a large number of small firms producing similar products, with easy entry and exit from the market, leading to price-taking behavior.

New Firms

New firms refer to businesses that have been recently established and are in the early stages of their operational life.