All else equal, which of the following is likely to increase a company's additional funds needed (AFN)?
A. An increase in its dividend payout ratio.
B. The company has a lot of excess capacity
C. Accounts payable increase faster than sales.
D. All the statements above are correct.
E. None of the statements above is correct.
AFN = (A*/S)DS - (L*/S)DS - (M)(S1)(RR).
If the firm's dividend payout ratio increases, (RR) will decrease. This will decrease the value of ...
The solution provides the correct answer, but also explains why the other responses are incorrect.