A Firm Has a Fixed Debt-To-Equity Ratio and Dividend Policy

question 35

Multiple Choice

A firm has a fixed debt-to-equity ratio and dividend policy. Assets and net income are proportional to sales, and new equity will not be issued. Which of the following statements is most correct?

• A) Almost any growth rate is theoretically possible.
• B) Only one growth rate is possible.
• C) The firm cannot grow.
• D) The firm's growth rate must be less than some maximum.

---

Definitions:

Cash Discounts

A reduction in the invoice amount by a seller to encourage early payment from the buyer, usually within a specified time frame.

Periodic Inventory

An inventory system where stock levels are checked and updated at regular, specified intervals.

Computerized Accounting Systems

Software applications designed to manage and automate financial transactions and records for businesses.

Single-Step Income Statement

A form of income statement in which the total of all expenses is deducted from the total of all revenues.