Which of the Following Statements Is Correct If a Firm's

question 31

Multiple Choice

Which of the following statements is correct if a firm's pro forma financial statements project net income of $12,000 and external financing required of $5,000?

• A) Total assets cannot grow by more than $10,000.
• B) Dividends cannot exceed $10,000.
• C) Retained earnings cannot grow by more than $12,000.
• D) Long-term debt cannot grow by more than $5,000.

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Definitions:

Marginal Tax Rate

The tax rate that applies to the last dollar of the tax base (income or wealth) earned.

Average Tax Rate

The ratio of total taxes paid to total income, representing the percentage of income that goes to taxes.

Income

The money received by a person or household from various sources like work, investments, or benefits, typically used for consumption, savings, and investing.

Equity

The value of an ownership interest in property, including shareholders' equity in a corporation, representing assets minus liabilities.