If Two Firms Have the Same Current Dividend and the Same

question 63

True/False

If two firms have the same current dividend and the same expected growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium.

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Definitions:

Operating Leverage

An indicator of the way in which growth in revenue results in an increase in operating profit, revealing the ratio of fixed to variable expenses within a business.

Net Operating Income

The total profit of a company after operating expenses are deducted, but before taxes and interest payments.

Sales Increase

It refers to the upward change in the number of products sold or the value of sales over a specific period.

Percentage of Sales

The percentage of sales method is a financial forecasting model that estimates various financial figures as a fixed percentage of predicted sales.