Final answer:
A higher margin increases unlevered free cash flows since the company retains more profit per dollar of sales. In financial markets, a rise in demand for loans and a rise in supply of loans both lead to an increased quantity of loans made and received.
Step-by-step explanation:
The impact of a higher margin on unlevered free cash flows is that it typically increases the unlevered free cash flows. This is because higher margins mean that a company is earning more per dollar of sales after covering the cost of goods sold. Since unlevered free cash flow is calculated before the effects of debt and interest, it reflects the operating efficiency of a company, which is improved by higher margins. When a company has a higher operating margin, it retains more from each dollar of sales, which translates into higher unlevered free cash flows.
In the context of the financial market, an increase in the quantity of loans made and received can occur due to two primary reasons: a rise in demand for loans, which indicates more borrowers are seeking to take out loans, or a rise in supply of loans, which suggests lenders are willing to offer more loans. Both of these factors contribute to an increase in loan transactions within financial markets.