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:

Sales Price

The amount of money for which a product or service is sold to a customer.

Budgeted Cash Disbursements

An estimate of all cash payments that a business plans to make over a specific period, including expenses, purchases, and investments.

Merchandise Purchases

The buying of goods for resale, specifically those goods bought by a retailer to be sold to customers.

Operating Expenses

Ongoing costs for running a product, business, or system that do not include cost of goods sold but can include items like salaries and utilities.