Financial Management: Theory & Practice
15th Edition
ISBN: 9781337248006
Author: Eugene F. Brigham; Michael C. Ehrhardt
Publisher: Cengage Learning US
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Chapter 12, Problem 6Q
Suppose a firm makes the following policy changes listed. If a change means that external, nonspontaneous financial requirements (AFN) will increase, indicate this by a (+); indicate a decrease by a (−); and indicate no effect or an indeterminate effect by a (0). Think in terms of the immediate effect on funds requirements.
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Students have asked these similar questions
If the key ratios are expected to remain constant, the AFN equation can be used toforecast the need for external funds. Write out the equation and explain its logic.
The funds requirement can be forecasted by theforecasted financial statement approach, but youcould also use the AFN formula. What is thisformula, and how does it work? What are itsadvantages and disadvantages relative to thefinancial statement method?
When we use the AFN equation to forecast the additional funds needed (AFN), we are implicitly assuming that all financial ratios are constant.
A. True
B. False
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Financial Management: Theory & Practice
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