Andrew's Specialty Store Has Sales of $200,000, Net Income of $18,500

question 281

Multiple Choice

Andrew's Specialty Store has sales of $200,000, net income of $18,500, total assets of $300,000, and total equity of $250,000. The firm paid $7,400 in dividends and maintains a constant dividend
Payout ratio. Currently, they are operating at full capacity. All costs and assets vary directly with
Sales. The firm does not want to obtain any additional external equity. At the sustainable rate of
Growth, how much new total debt must the firm acquire?

• A) $0
• B) $1,407
• C) $2,323
• D) $5,983
• E) $6,112

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Definitions:

Costs to Business

All expenses incurred by a business in the process of producing goods or services, including both fixed and variable costs.

Distribution of Output

The way in which the total goods and services produced by an economy are allocated or distributed among its population.

Interest Income

The earnings received from investments in vehicles such as savings accounts, certificates of deposit, or bonds, typically presented as a percentage of the investment's total value.

Quantitative Measures

Numeric indicators or metrics used to evaluate, compare, and track performance or outcomes.