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Suppose a firm makes the policy changes listed below. If a change means that external, nonspontaneous 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 sell on credit (previously all sales had been on a cash basis).
d. The firm's profit margin is eroded by increased competition; sales are steady.
e. the firm sells its manufactiuringplants for cash to a ccnotractor and simultaneoulsy signs an outsouceing contract to purchase from the contractor goods that the firm formerly produced.
f. The firm negotiates a new contract with its union that lowers it labor costs without affecting it output

 

Basic Finance, Finance

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