On the Basis of Historical Relationships Between Its Balance Sheet

question 21

Multiple Choice

On the basis of historical relationships between its balance sheet items and its sales, profit margin, and dividend policy, Thode Corporation's analysts have graphed the relationship of additional funds needed (on the Y-axis) to possible growth rates in sales (on the X-axis) . If Thode decides to increase the percentage of earnings paid out as dividends, which of the following changes would occur in the graph?

• A) The line would shift to the right.
• B) The line would pass through the origin.
• C) The line would shift to the left.
• D) The slope coefficient would fall.
• E) The slope coefficient would increase.

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Definitions:

Logarithm

A mathematical operation that determines the power to which a base must be raised to produce a given number.

Graph

A diagram showing the relation between variable quantities, typically of two variables, each measured along one of a pair of axes at right angles.

Logarithm

The exponent or power to which a base, typically 10 or e, must be raised to produce a given number; it is the inverse operation of exponentiation.

Graph

A visual diagram that exhibits the arrangement of connections or interrelations among several objects with the help of unique symbols including dots, lines, and bars.