Question

With a full capacity, the need of additional funds of a firm is reduced by

____

Spontaneous growth of current liabilities

Spontaneous growth of current assets

A sharp increase in forecasted sales

A moderate growth of dividends

Answer 1

With a full capacity, the need of additional funds of a firm is reduced by ____

Spontaneous growth of current liabilities. This would partly finance the growth in assets.

Other options:

Spontaneous growth of current assets--This will increase need for AFN

A sharp increase in forecasted sales--This will increase assets, spontaneous liabilities and retained earnings. The may or may not be a reduction in AFN.

A moderate growth of dividends--This will increase the need for AFN