Attempts Keep the Highest / 2 2. Factors that affect the AFN equation Several foctors affect a firm's need for extemal funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to increase o firm's need for external capital-that is, its AFN (additional funds needed). Check all that apply. The firm's inventory turnover decreases, with no effect on the sales forecast. The firm previously thought its fixed assets were being operated at full capsety, but now it learns that it actually has excess capacity. The firm increases its dividend parout ratio. Dividends to common shareholders are paid out of after-tax earnings. Do these payouts affect a firm's AFN? Yes, dividends still affect a firm's AFN even though they are paid out of after-tax earnings