budgeting

Navas 27 April 2020 at 12:39 PM

Question	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) II and V.
	B) III and IV.
	C) II, IV and V.
	D) I, II, and V.

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FACULTY 18 May 2020 at 01:15 PM

I, II, and V.(option D)

I. The dividend payout ratio increases.

II. The company changes its credit terms, increasing the time it gives customers to pay.

V. Increased competition forces the company to lower its prices.

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TahliaDenny 12 February 2026 at 09:39 AM

Great question! Events that increase external financing needs are those that drain cash or slow collections. I'd go with D) I, II, and V. Higher dividends (I) mean less retained earnings, extended customer credit (II) ties up cash in receivables, and lower prices (V) squeeze margins. It's like playing Infinite Craft - you need to balance your resources carefully, or you'll run short when you need them most. Option III actually helps by extending payables, and IV (higher retention) reduces financing needs.

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