A company expects sales to increase during the coming year, and it is using the

Question

A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase?

1. The company increases it's dividend payout ratio

2. The company decides to stop taking discounts on purchased materials

3. The company's profit margin increases

4. The company begins to pay employees monthly rather than weekly

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

Explanation / Answer

The company increases its dividend payout ratio.

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