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Suppose a firm makes the following policy changes. If the change means that external nonspontaneous financial requirements (AFN) will increase, indicate this with a (+); indicate a decrease with a (−); and indicate an indeterminate or negligible effect with a (0). Think in terms of the immediate short-run effect on funds requirements. a. The dividend payout ratio is increased. __________ b. Rather than produce computers in advance, a computer company decides to produce them only after an order has been received. __________ c. The firm decides to pay all suppliers on delivery, rather than after a 30-day delay, to take advantage of discounts for rapid payment. __________ d. The firm begins to sell on credit. (Previously, all sales had been on a cash basis.) __________ e.The firm’s profit margin is eroded by increased competition; sales are steady. __________ f. Advertising expenditures are stepped up. __________ g. A decision is made to substitute long-term mortgage bonds for short-term bank loans. __________ h. The firm begins to pay employees on a weekly basis. (Previously, it had paid employees at the end of each month.) __________

BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937
BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937

Solutions

Chapter
Section
Chapter 16, Problem 5Q
Textbook Problem

Suppose a firm makes the following policy changes. If the change means that external nonspontaneous financial requirements (AFN) will increase, indicate this with a (+); indicate a decrease with a (−); and indicate an indeterminate or negligible effect with a (0). Think in terms of the immediate short-run effect on funds requirements.

a. The dividend payout ratio is increased. __________
b. Rather than produce computers in advance, a computer company decides to produce them only after an order has been received. __________
c. The firm decides to pay all suppliers on delivery, rather than after a 30-day delay, to take advantage of discounts for rapid payment. __________
d. The firm begins to sell on credit. (Previously, all sales had been on a cash basis.) __________
e.The firm’s profit margin is eroded by increased competition; sales are steady. __________
f. Advertising expenditures are stepped up. __________
g. A decision is made to substitute long-term mortgage bonds for short-term bank loans. __________
h. The firm begins to pay employees on a weekly basis. (Previously, it had paid employees at the end of each month.) __________

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