If a Firm Equates Its Pro Forma Sales Growth to the Rate

question 10

Multiple Choice

If a firm equates its pro forma sales growth to the rate of sustainable growth, and has positive net income and excess capacity, then the:

• A) maximum capacity level will have to increase at the same rate as sales growth.
• B) total assets will have to increase at the same rate as sales growth.
• C) debt-equity ratio will increase.
• D) retained earnings will increase.
• E) number of common shares outstanding will increase

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Definitions:

Obsolete

describes anything that is out of date or no longer in use, often because it has been replaced by newer versions or technologies.

Judicially Decreed

Formally ordered or adjudged by a court.

State

A political entity with a centralized government that has sovereignty over a geographical area and maintains a monopoly on the legitimate use of force within that area.

Shareholder

An individual or institution that owns at least one share of a company's stock, making them a partial owner.