Asked by Jacob Rucker on Jul 08, 2024
Verified
Jefferson City Computers has developed a forecasting model to estimate its AFN for the upcoming year.All else being equal,which factor is most likely to lead to an increase of the additional funds needed?
A) a sharp increase in its forecasted sales
B) a sharp reduction in its forecasted sales
C) a reduction in its dividend payout ratio
D) excess capacity in its fixed assets
Forecasting Model
A quantitative tool or method used to predict future events or trends based on historical data.
Additional Funds Needed (AFN)
Additional Funds Needed (AFN) is a financial metric estimating the amount of new external financing a firm will require to support a projected increase in its assets.
- Master the foundational concepts and the practical uses of the Additional Funds Needed (AFN) formula.
- Identify the elements that affect the demand for external funding.
Verified Answer
LV
loredana vescioJul 13, 2024
Final Answer :
A
Explanation :
A sharp increase in forecasted sales will likely increase the additional funds needed. This is because the company will need to finance the additional assets and operating expenses required to support the higher level of sales.
Learning Objectives
- Master the foundational concepts and the practical uses of the Additional Funds Needed (AFN) formula.
- Identify the elements that affect the demand for external funding.
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