Suppose a Firm Is Working at Full Capacity and That

question 274

Multiple Choice

Suppose a firm is working at full capacity and that assets, costs, and all liabilities are tied directly to the level of sales. In addition, the firm pays out all its earnings as dividends, and sales are expected to increase by 10% next period. The firm is financed half with equity and half with debt. The external financing needed to support this growth:

• A) Is zero since all liabilities are tied directly to the level of sales?
• B) Depends on the profit margin.
• C) Is equal to half the dollar increase in assets.
• D) Is equal to twice the dollar increase in liabilities.
• E) Is equal to the growth rate times total assets.

---

Definitions:

Visible Spectrum

The portion of the electromagnetic spectrum that is visible to the human eye, typically encompassing wavelengths from about 380 to 750 nanometers.

Longer Wavelengths

Describes the property of light or electromagnetic waves characterized by greater distances between wave peaks, often associated with lower frequencies and energies.

Red

A primary color that is at the end of the visible spectrum of light, next to orange and opposite violet, often associated with danger, passion, and energy.

Top-down Processing

An approach to perception that emphasizes the importance of conceptual knowledge, expectations, and memory in interpreting sensory information.