All of the Following Statements Are Correct Except

question 88

Multiple Choice

All of the following statements are correct except:

• A)The internal growth rate measures how quickly a firm can increase its asset base over the next year without raising outside funds.
• B)The retention rate represents the proportion of every $1 of earnings per share that is retained by the firm; in other words, it is equal to one minus the dividend payout ratio.
• C)The sustainable growth rate measures how quickly the firm can grow when it uses only debt financing to keep its capital structure constant over time.
• D)The internal and sustainable growth rate relationships suggest that there are three measurable influences on growth: dividend policy (as reflected in the retention rate), profitability (as measured by ROA), and the firm's capital structure (as measured by the equity multiplier).
• E)All of the above statements are correct.

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Definitions:

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, including balance sheet, income statement, and cash flow statement.

Income Taxes

Taxes levied by the government on income generated by businesses and individuals within their jurisdiction.

Units-Of-Output

A depreciation method where the expense is based on the number of units produced or the machine hours used during the period.

Match of Expenses

The accounting principle of recognizing expenses in the same period as the revenues they helped to generate.