5. Factors that affect the AFN equation 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 capitalthat is, its AFN (additional funds needed). Check all that apply. The firm improves its production system and increases its profit margin. Management has decided that the firm needs to keep more inventory on hand throughout the year. The firm's forecasted sales are unexpectedly increased. Tolbotics Inc. has seen its profit margin eroded by increased competition over the last year, but its sales have remained steady. Assuming everything else is held constant, will this affect the firm's AFN? No, the firm's AFN will not be affected, because the firm's sales have remained constant. Yes, the decrease in profit margin will affect the firm's AFN even though its sales have remained constant