Frazier Fudge Is Projecting a Growth in Sales Next Year

question 148

Multiple Choice

Frazier Fudge is projecting a growth in sales next year of 10% along with an external financing requirement of $200. They had the following results this year: Sales of $18,000; Assets of $6,460; Current liabilities of $500; Return on Sales of 10%. Calculate their projected dividend payout ratio. (Assume that assets, current liabilities, and income grow with the level of sales.)

• A) 80%
• B) 60%
• C) 40%
• D) 20%

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Definitions:

Variable Costs

Expenses that change in proportion to the level of production or sales activity, such as raw materials and direct labor.

Break-even Sales

The amount of revenue needed to cover total costs, resulting in neither profit nor loss.

Variable Costs

Costs that vary in proportion to the level of activity or volume of production in a business.

Break-even Point

The break-even point is the point at which total costs and total revenues are equal, meaning the business is neither making a profit nor a loss.