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:

Quantity Discounts

Price reductions offered to customers for purchasing goods or services in large quantities.

Periodic Inventory System

A method of inventory valuation for financial reporting purposes where a physical count of the inventory is taken at specific intervals.

Perpetual Inventory System

An inventory management approach where transactions are recorded in real-time, immediately affecting the inventory account.

FOB Shipping Point

A term used in shipping contracts to indicate that the buyer is responsible for the goods once they are shipped, and must pay for the shipping costs.