Considering each action independently and holding other things constant, which of the following actions would increase a firm's discretionary financing needed (the need for additional capital)?
A) A decrease in the firm's accounts receivable average collection period
B) An increase in the firm's profit margin
C) A decrease in the firm's inventory turnover
D) A decrease in the expected growth rate in sales

Question

Quizplus · Accepted Answer

A decrease in inventory turnover indicates that the firm is not able to sell its inventory as quickly as before, which means it will require additional capital to finance the excess inventory. The other actions listed would either decrease the need for additional capital (such as B and D) or have no direct impact on it (such as A).

Considering Each Action Independently and Holding Other Things Constant, Which