Assume Costs and Assets Increase at the Same Rate as Sales

question 20

Multiple Choice

Assume costs and assets increase at the same rate as sales. Also assume 40% of net income is paid out in dividends, the current debt to equity ratio is optimal, and that no new equity sales are
Possible. Forecast the addition to retained earnings assuming the firm's sales increase at the
Maximum percent possible given these assumptions.

• A) $43.2
• B) $88.5
• C) $113.3
• D) $146.7
• E) $167.8

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Definitions:

Entrepreneurship

The act of launching, managing, and developing a business venture in order to gain profit by taking on financial risks in the corporate world.

Entrepreneurs

Individuals who create, organize, and manage enterprises, especially businesses, usually with considerable initiative and risk.

Mistakes

Actions or decisions that are wrong or inaccurate, often resulting from bad judgment or a lack of information.

External Locus of Control

A psychological concept where individuals believe that their successes or failures result from external factors beyond their control, rather than their own efforts.