2. Factors that affect the AFN equation 1. Several factors affect a firm's need for external funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to...

2. Factors that affect the AFN equation

1. Several factors affect a firm's need for external funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to increase a firm's need for external capital—that is, its AFN (additional funds needed).Check all that apply.

The firm's inventory turnover decreases, with no effect on the sales forecast.

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

The firm increases its dividend payout ratio.

2. Accounts payable and accrued liabilities represent obligations that the firm must pay off. Assuming everything else holds constant, if they increase, the firm's AFN will?

a.      Increase

b.     Decrease