If a Firm with a Positive Net Worth Is Operating

question 16

True/False

If a firm with a positive net worth is operating its fixed assets at full capacity, if its dividend payout ratio is 100%, and if it wants to hold all financial ratios constant, then for any positive growth rate in sales, it will require external financing.

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Definitions:

Price Ceiling

A government-imposed limit on the maximum price that can be charged for a product or service.

Price Floor

A government-imposed minimum price charged for a commodity, intended to protect producers by ensuring prices do not fall below a certain level.

Consumer Surplus

The distinction in the total financial outlay consumers are prepared to make for a good or service and the outlay made.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded, typically sloping downward from left to right.