Suppose a firm makes the policy changes listed below. If a change means that external, nonspontaneous financial
Question:
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.
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a. The dividend payout ratio is increased. b. The firm decides to pay all suppliers on delivery, ather 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.
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Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
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