Which of the Following Statements Regarding Profitable and Unprofitable Growth

question 54

Multiple Choice

Which of the following statements regarding profitable and unprofitable growth is false?

• A) If a firm wants to increase its share price, it must cut its dividend and invest more.
• B) If the firm retains more earnings, it will be able to pay out less of those earnings, which means that the firm will have to reduce its dividend.
• C) A firm can increase its growth rate by retaining more of its earnings.
• D) Cutting the firm's dividend to increase investment will raise the stock price if, and only if, the new investments have a positive NPV.

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Definitions:

Standard Price

A predetermined cost assigned to materials, labor, and overhead, used in budgeting and variance analysis.

Actual Output

Actual output refers to the total amount of products or services produced by a company or sector in a given period.

Variable Manufacturing Overhead

Costs in the production process that fluctuate with the volume of production, such as utilities for the machinery.

Direct Labour Hours

The total hours worked by employees that are directly involved in the manufacturing or production process.