Growth rate without the firm having to raise external funds

Assignment Help Financial Management

Reference no: EM131896882

Which of the following statements is correct? a. 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 b. 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 c. 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 d. 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 e. Dividend policy does not affect the requirement for external funds based on the AFN equation.

Reference no: EM131896882

Questions Cloud

Both bonds make semiannual payments : Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments.

Develop strategy or strategies for achieving its goals : Once a firm has defined its purpose, scope, and objectives, it must develop a strategy or strategies for achieving its goals.

New sausage system with an installed cost : Franks is looking at a new sausage system with an installed cost of $505099. what is the NPV of this project?

Dividends are used far more often than stock splits : especially determining the tax basis of their shares when they decide to sell them, so today stock dividends are used far more often than stock splits

Growth rate without the firm having to raise external funds : The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds.

Postpone paying taxes on dividends credited to their account : One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account

Capture the fundamental outlook of the homebuilding industry : In your view, which three indicators best capture the fundamental outlook of the homebuilding industry

What is the length of the cash conversion cycle : What is the length of the cash conversion cycle? How many times per year does Zane turn over its inventory?

Calculate current yield of the bond : Calculate current yield of the bond using Excel formulas.

User Account

All Pages