Reference no: EM131448359
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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