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:

Perfect Competition

A market structure characterized by many buyers and sellers, where all firms sell identical products and no single buyer or seller can influence the market price.

Identical Goods

Products that are exactly the same in every aspect, leading consumers to have no preference for one product over another based on characteristics, brand, or quality.

Perfect Competition

A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price taking behavior.

Ease of Entry

Ease of entry refers to the lack of barriers for new firms to enter and compete in an industry or market, impacting competition and market dynamics.