Sales Revenue of Firm X Was $10 Million in 2007

question 31

Short Answer

Sales revenue of firm X was $10 million in 2007. In 2010, the same firm reported higher sales revenue of $15 million. The producer price indices for 2007 and 2010 were 130 and 135.
A) Compute the nominal increase in sales revenue between 2007 and 2010.
B) Compute the real increase in sales revenue between 2007 and 2010.

• A) Compute the nominal increase in sales revenue between 2007 and 2010.
• B) Compute the real increase in sales revenue between 2007 and 2010.

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Definitions:

Market Value

The present rate at which a product or service can be purchased or sold in the market.

Residual Dividend Policy

A strategy where a company pays dividends out of the residual or leftover equity once all project capital requirements are met.

Payout Ratios

The percentage of a company's earnings distributed to its shareholders in the form of dividends, relative to its total earnings.

Stock Repurchases

A corporate action in which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.