Considering each action independently and holding other things constant,which of the following actions would reduce the firm's need for additional capital?
A) An increase in the dividend payout ratio.
B) A decrease in the profit margin.
C) A decrease in the days sales outstanding.
D) An increase in expected sales growth.
E) A decrease in the accrual accounts (accrued wages and taxes).

Question

Quizplus · Accepted Answer

A decrease in the days sales outstanding means that the firm is collecting its receivables faster, which means it is receiving cash sooner and reducing the need for working capital or additional financing. The other options would either increase the need for capital (A, D) or have no direct impact on the need for capital (B, E).

Considering Each Action Independently and Holding Other Things Constant,which of the Following