The Paper Mill Is Operating at Full Capacity

question 30

Multiple Choice

The Paper Mill is operating at full capacity. Assets, costs, and current liabilities vary directly with sales. The dividend payout ratio is constant. The firm has sales of $42,700, net income of $5,500, total assets of $48,900, current liabilities of $3,650, long-term debt of $18,100, owners' equity of $27,150, and dividends of $1,925. What is the external financing need if sales increase by 14 percent?

• A) −$1,816
• B) −$1,268
• C) $1,031
• D) $3,504
• E) $2,260

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Definitions:

Common Axis

Refers to the shared axis around which components or features are symmetrical or rotate, promoting alignment.

Rotates

The action of an object turning or spinning around an axis, either in a circular or semi-circular direction.

Mechanism

A system of moving parts designed to perform a specific function within a larger machine or device.

Abbreviation

An abbreviated version of a word or phrase.