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Suppose a firm makes the following policy changes. If the change means that external non-spontaneous 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 for 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...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

Solutions

Chapter
Section
Chapter 17, Problem 5Q
Textbook Problem

Suppose a firm makes the following policy changes. If the change means that external non-spontaneous 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 for 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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