Which of the Following Statement Is Correct If a fiRm

question 71

Multiple Choice

Which of the following statement is correct if a firm believes its costs and assets grow at the same rate as sales, the dividend payout ratio is fixed, no new equity is possible, and the current debt-
Equity ratio is optimal?

• A) The sustainable growth rate gives the maximum rate at which sales can grow.
• B) External financing will be zero.
• C) Asset growth must completely come from increases in accounts payable and retained earnings.
• D) If the firm pays out in dividends all of its net income, sales will grow.
• E) If the firm pays out its current ratio, its sales cannot grown.

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Definitions:

Phalanges

Bones in the fingers or toes.

Mineral

In the diet, an element that is required in small amounts for normal metabolism.

Bones

Hard, dense connective tissue that forms the structural elements of the skeleton in vertebrates, providing support and protection.

Motor Neuron

Neuron that controls a muscle or gland.