Which of the Following Statements Is Most Correct

question 6

Multiple Choice

Which of the following statements is most correct?

• A) If the capital intensity ratio is high, this permits sales to grow more rapidly without much outside capital.
• B) The lower the profit margin, the lower the additional funds needed because less assets are needed to support existing sales.
• C) When positive economies of scale are present, linear balance sheet relationships no longer hold. As sales increase, a proportionately greater stock of assets is required to support the higher sales level.
• D) Technological considerations often require firms to add fixed assets in large, discrete units. Such assets are called lumpy assets and they affect the firm's financial requirements through the fixed assets/sales ratio at different sales levels.
• E) The percentage of sales method accounts for changing balance sheet ratios and thus, cyclical changes in the actual sales/assets ratio do not have an impact on financing requirements.

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Definitions:

Group Selection

A theory in evolution proposing that natural selection operates on groups, not just individuals, for the survival benefit of the group.

Forage

The act of searching for and exploiting food resources in the environment by animals.

Monogamy Hypothesis

The theory suggesting that monogamy is favored in certain environments as it enhances offspring survival through biparental care.

Haplodiploidy Hypothesis

A genetic mechanism explaining the evolved social behavior in certain species, where males are haploid and females are diploid.