Which of the Following Statements Is CORRECT

question 5

Multiple Choice

Which of the following statements is CORRECT?

• A) The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds. In other words, it is the growth rate at which the firm's AFN equals zero.
• B) If a firm's assets are growing at a positive rate, but its retained earnings are not increasing, then it would be impossible for the firm's AFN to be negative.
• C) If a firm increases its dividend payout ratio in anticipation of higher earnings, but sales and earnings actually decrease, then the firm's actual AFN must, mathematically, exceed the previously calculated AFN.
• D) Higher sales usually require higher asset levels, and this leads to what we call AFN. However, the AFN will be zero if the firm chooses to retain all of its profits, i.e., to have a zero dividend payout ratio.
• E) Dividend policy does not affect the requirement for external funds based on the AFN equation.

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Definitions:

Obstructive Sleep Apnea

A sleep disorder characterized by repeated stopping and starting of breathing due to throat muscles intermittently relaxing and blocking the airway during sleep.

Retained Secretions

Secretions that are not adequately cleared from the body, often referring to mucus or fluid in the lungs.

Thorax

The part of the body between the neck and the abdomen, encased by the ribs and containing the heart and lungs.

Congested

Refers to an area or organ being overly filled or crowded, often leading to a blockage or accumulation, such as in the nasal passages or roads.