If a Non-Dividend-Paying Firm Bases Its Growth Assumptions on the Sustainable

question 1

Multiple Choice

If a non-dividend-paying firm bases its growth assumptions on the sustainable rate of growth and shows positive net income,then the pro forma statement must reflect

• A)an increase in fixed assets irrespective of the firm's current operating capacity.
• B)an increase in both sales and the debt-equity ratio.
• C)both an increase in the total asset turnover and in the equity multiplier.
• D)a constant debt-equity ratio and an increase in retained earnings.
• E)increases in fixed assets,the debt-equity ratio,and the number of shares outstanding.

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Definitions:

Consequences

The outcomes or effects that result from a particular action or condition.

Economic Injury

Financial harm or damage suffered by an individual, entity, or economy, often due to external factors or actions.

Intentional Tort

A wrongful act done on purpose that causes harm to someone else, including acts like assault or fraud.

Physical Injury

Bodily harm or damage to a person's body, as opposed to emotional or psychological harm.