Question ID: HOCK CMA.P1A5.07 (Topic: Top-Level Planning and Analysis)
- This topic has 3 replies, 2 voices, and was last updated 2 months, 1 week ago by Lynn Roden.
I have a question about item II below: why would increasing time given to customers to pay increase requirements for external financing to increase?
To me, this looks like a trade off between cash and accounts receivable with no impact to asset. Why would there be a need to increase external financing, i.e. liability? Thank you!
Which of the following events will cause a company’s requirements for external financing to increase?
I. The dividend payout ratio increases. II. The company changes its credit terms, increasing the time it gives customers to pay. III. The company negotiates a lower price and longer terms with a major supplier. IV. The retention ratio increases. V. Increased competition forces the company to lower its prices.
- A. I, II, and V.correct
- B. III and IV.
- C. II and V.
- D. II, IV and V.
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