A Company Expects Sales to Increase During the Coming Year

question 11

Multiple Choice

A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise.Which of the following conditions would cause the AFN to increase?

• A) The company increases its dividend payout ratio.
• B) The company begins to pay employees monthly rather than weekly.
• C) The company's profit margin increases.
• D) The company decides to stop taking discounts on purchased materials.
• E) The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.

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Definitions:

Corporate Fundamentals

The basic elements that underline a company's financial health and operations, including its revenue, profits, and assets.

Production Function

An equation that describes the maximum output that can be produced with a given set of inputs.

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts or funds obtained from special financing sources.

Labor

The utilization of human physical and intellectual capacities in the generation of goods and services.