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.

---

Definitions:

Time And Materials Contract

A contract agreement where payment is based on the actual labor hours worked and materials used.

Labor-Hour Contract

A contract in which payment is made based on the number of hours worked, typically used for projects where the scope is not clearly defined.

Hourly Rate

The amount of money paid for each hour of work.

Incentive Fee Contract

A contract type that provides additional compensation to the contractor for exceeding performance targets.