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:

Insured Risk

A risk that has been covered by an insurance policy, transferring the financial burden of a potential loss from the insured to the insurer.

Asymmetric Information

Asymmetric information occurs when one party in a transaction has more or better information than the other, leading to an imbalance in the decision-making process.

Unsuspecting Buyer

A consumer who purchases goods or services without being aware of all the relevant information, often leading to disadvantageous situations.

Auto Transmission

A type of vehicle transmission that automatically changes gear ratios as the vehicle moves, without input from the driver.