+1-415-670-9189
info@expertsmind.com
Several factors affect firms need for external funds
Course:- Financial Management
Reference No.:- EM13891896




Assignment Help
Assignment Help >> Financial Management

Several factors affect a firm’s need for external funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to increase a firm’s need for external capital—that is, its AFN (additional funds needed). Check all that apply.

a) The firm decreases its retention ratio.

b) The firm previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.

c) The firm switches its supplier for the majority of its raw materials. The new supplier offers less favorable credit terms and thus reduces the trade credit available to the firm, resulting in a reduction in accounts payable.

Dividends to common shareholders are paid out of after-tax earnings. Do these payouts affect a firm’s AFN?

a) Yes, dividends still affect a firm’s AFN even though they are paid out of after-tax earnings.

b) No, dividends do not affect a firm’s AFN, because they are paid out of after-tax earnings.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $11.8 million, which will be depreciate
“You plan to buy a $400,000 home with a 25% down payment. The bank you want to finance the loan with suggests two options: a 20-year mortgage at 5% APR and a 25-year mortgage
Dublin Medical (DM), a large established corporation with no growth in its real earnings, is considering acquiring 100% of the shares of Arlington Corporation, a young firm wi
Solar Energy will pay an annual dividend of $1.93 per share next year. The company just announced that future dividends will be increasing by 1.6 percent annually. How much ar
Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.75 percent and the real risk-free rate i
A $2,300 face value corporate bond with a 6.2 percent coupon (paid semiannually) has 12 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 6.
Essence of Skunk Fragrances, Ltd., sells 5,500 units of its perfume collection each year at a price per unit of $385. All sales are on credit with terms of 3/20, net 40. The d
Suppose the risk-free rate is 4.4 percent and the market portfolio has an expected return of 11.1 percent. The market portfolio has a variance of .0402. Portfolio Z has a corr