Jefferson City Computers has developed a forecasting model to estimate its AFN for the upcoming year. All else being equal, which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)? A) A sharp increase in its forecasted sales. B) A switch to a just-in-time inventory system and outsourcing production. C) The company reduces its dividend payout ratio. D) The company switches its materials purchases to a supplier that sells on terms of 1/5, net 90, from a supplier whose terms are 3/15, net 35. E) The company discovers that it has excess capacity in its fixed assets.

Question

Quizplus · Accepted Answer

A sharp increase in forecasted sales would likely increase the AFN because higher sales typically require more assets, such as inventory and receivables, which in turn require additional financing.

Jefferson City Computers Has Developed a Forecasting Model to Estimate