Which of the Following Statements Is CORRECT

question 44

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:

Entrepreneurial Firms

Companies focused on innovation, rapid growth, and high risk, often in emerging industries or markets.

Growth

The process of increasing in size, number, value, or strength, often used in contexts of individual development, economic progress, or business expansion.

Takeoff

In business, refers to the phase where a product or company experiences rapid growth after initial establishment. In aviation, it describes the act of an aircraft becoming airborne.

Birth Stage

The initial phase in the lifecycle of a company or product, characterized by development and early market introduction efforts.