If a Firm Bases Its Growth Projection on the Rate

question 59

Multiple Choice

If a firm bases its growth projection on the rate of sustainable growth, and shows positive net income, then the:

• A)fixed assets will have to increase at the same rate, regardless of the current capacity level.
• B)number of common shares outstanding will increase at the same rate of growth.
• C)debt-equity ratio will have to increase.
• D)debt-equity ratio will remain constant while retained earnings increase.
• E)fixed assets, debt-equity ratio, and number of common shares outstanding will all increase.

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Definitions:

Social Investment Principle

The theory that individuals' maturity and psychological growth are influenced by their engagement in and commitments to social roles and responsibilities.

Personality Traits

Enduring characteristics that describe an individual's behavior, such as extraversion, agreeableness, and conscientiousness.

Social Roles

The patterns of behavior expected of individuals in specific positions within a social group or society.

Commerce

The activity of buying and selling of goods and services, especially on a large scale, involving transportation and trade between parties.