Reference no: EM13572708

Suppose a firm makes the policy changes listed below. If a change means that external, non spontaneous financial requirements (AFN) will increase, indicate this by a (+); indicate a decrease by a (-); and indicate no effect or an indeterminate effect by a (0). Think in terms of the immediate, short-run effect on funds requirements.

a. The dividend payout ratio is increased.

b. The firm decides to pay all suppliers on delivery, rather than after a 30-day delay, to take advantage of discounts for rapid payment.

c. The firm begins to offer credit to its customers, whereas previously all sales had been on a cash basis.

d. The firm"s profit margin is eroded by increased competition, although sales hold steady.

e. The firm sells its manufacturing plants for cash to a contractor and simultaneously signs an outsourcing contract to purchase from that contractor goods that the firm formerly produced.

f. The firm negotiates a new contract with its union that lowers its labor costs without affecting its output.