Which of the Following Is Correct When a Firm's Pro

question 33

Multiple Choice

Which of the following is correct when a firm's pro forma statements project a net income of $5,000 and an external financing requirement of $2,000?

• A) Dividends cannot exceed $3,000.
• B) Total assets cannot grow by more than $3,000.
• C) Retained earnings cannot grow by more than $5,000.
• D) The internal growth rate is 60%.

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Definitions:

Crony Capitalism

A situation where the institutions of markets are maintained, but the allocation of resources, and the profit and loss of businesses, are determined by political decision-making rather than consumer purchases and market forces. To a large degree, the activities of business firms are directed and controlled by government spending and regulation. In turn, many of the business firms will use contributions and other forms of political support to compete for government favors.

Government Favors

Benefits or advantages granted by the government to specific groups, businesses, or individuals, potentially influencing market outcomes and competitiveness.

Price Floor

A legally established minimum price buyers must pay for a good or resource.

Market for Corn

A specific sector where buyers and sellers engage in the transaction of corn, influenced by factors like weather conditions and demand for biofuels.