Which of the Following Statements Is CORRECT

question 13

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm's assets are growing at a positive rate, but its retained earnings are not increasing, then it would be impossible for the firm's AFN to be negative.
• B) If a firm increases its dividend payout ratio in anticipation of higher earnings, but sales and earnings actually decrease, then the firm's actual AFN must, mathematically, exceed the previously calculated AFN.
• C) Higher sales usually require higher asset levels, and this leads to what we call AFN.However, the AFN will be zero if the firm chooses to retain all of its profits, i.e., to have a zero dividend payout ratio.
• D) Dividend policy does not affect the requirement for external funds based on the AFN equation.
• E) The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds.In other words, it is the growth rate at which the firm's AFN equals zero.

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Definitions:

World Price

The international market price of a good or service, determined by global supply and demand factors.

Importer or Exporter

An entity or country that buys goods from (importer) or sells goods to (exporter) other countries.

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Merchandise or services developed in one country and exported to customers in another country.

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Individuals or groups who purchase or consume maple syrup, impacting demand and market dynamics for this product.