Question 7Jefferson 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)?Answer A sharp increase in its forecast sales.A switch to a just-in-time inventory system and outsourcing production.The company reduces its dividend payout ratio.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.The company discovers that it has excess capacity in its fixed assets.2 pointsQuestion 8 The capital intensity ratio is generally defined as follows:Answer Sales divided by total assets, i.e., the total assets turnover ratio.The percentage of liabilities that increase spontaneously as a percentage of sales.
The ratio of sales to current assets.The ratio of current assets to sales.The amount of assets required per dollar of sales, or A0*/S0
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a. A sharp increase in its forecast sales
e. The amount of assets required per dollar of sales, or A*0/S0.
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