A company is forecasting an increase in sales and is using the AFN model to forecast the additional capital that they need to raise. Which of the following factors are likely to increase the additional funds needed (AFN)?
A) The company has a lot of excess capacity.
B) The company has a high dividend payout ratio.
C) The company has a lot of spontaneous liabilities that increase as sales increase.
D) The company has a high profit margin.
E) All of the answers above are correct.

Question

Quizplus · Accepted Answer

A high dividend payout ratio means that the company is distributing a large portion of its earnings to shareholders, leaving less retained earnings to finance growth, thus increasing the need for additional funds.

A Company Is Forecasting an Increase in Sales and Is