Which of the Following Statements Is CORRECT

question 13

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm's assets are growing at a positive rate, but its retained earnings are not increasing, then it would be impossible for the firm's AFN to be negative.
• B) If a firm increases its dividend payout ratio in anticipation of higher earnings, but sales and earnings actually decrease, then the firm's actual AFN must, mathematically, exceed the previously calculated AFN.
• C) Higher sales usually require higher asset levels, and this leads to what we call AFN.However, the AFN will be zero if the firm chooses to retain all of its profits, i.e., to have a zero dividend payout ratio.
• D) Dividend policy does not affect the requirement for external funds based on the AFN equation.
• E) The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds.In other words, it is the growth rate at which the firm's AFN equals zero.

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Definitions:

Sample

A subset of individuals or observations drawn from a population used for statistical analysis, intended to represent the population from which it is drawn.

Population

The entire group of individuals or instances about whom the study is to make inferences, in contrast to a sample drawn from it for analysis.

Census

A systematic collection, analysis, and publication of data pertaining to the population and its components at a specific time.

Anecdotal Evidence

Evidence based on personal accounts or individual instances rather than systematic scientific research.