Of the Following, a fiRm _______________ Will Likely Have the Most

question 149

Multiple Choice

Of the following, a firm _______________ will likely have the most liberal credit policy.

• A) That has a core group of customers, who purchase inventory on a frequent basis.
• B) That is presently operating its manufacturing facilities at maximum capacity.
• C) That is a wholesaler of fresh flowers.
• D) That is experiencing severe cash flow problems due to tremendous growth.
• E) Whose operating costs are almost all variable costs.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits that could have been received but were sacrificed in the pursuit of another option.

Debt-Equity Ratio

The quotient of total liabilities and shareholders' equity, representing a company's leverage financially.

Dividend Growth Model

A method for valuing a stock by assuming constant dividend growth and using future dividends to forecast stock price.