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. Management has decided that the firm needs to keep more inventory on hand throughout the year: 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. Dividends to common shareholders are paid out of after-tax earnings. Do these payouts affect a firm's AFN? Yes, dividends still affect a firm's AFN even though they are paid out of after-tax earnings. No, dividends do not affect a firm's AFN, because they are paid out of after-tax earnings