Jefferson City Computers Has Developed a Forecasting Model to Estimate

question 16

Multiple Choice

Jefferson City Computers 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 sharp increase in its forecasted sales.
• B) A switch to a just-in-time inventory system and outsourcing production.
• C) The company reduces its dividend payout ratio.
• D) The company switches its materials purchases to a supplier that sells on terms of 1/5, net 90, from a supplier whose terms are 3/15, net 35.
• E) The company discovers that it has excess capacity in its fixed assets.

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Definitions:

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.

Income Statement

A financial report that shows a company's revenues, expenses, and net income over a specific period.

Authorized

Authorized typically refers to something that has been officially approved or given permission by a relevant authority or governing body.

Issued

The term refers to securities or other financial instruments that have been made available for sale and distribution to the public.