Question

The external financing need: Select one: a. is unaffected by the dividend payout ratio. b. will...

The external financing need:

Select one:

a. is unaffected by the dividend payout ratio.

b. will limit growth if unfunded.

c. ignores any changes in retained earnings.

d. considers only the required increase in fixed assets.

e. must be funded by long-term debt

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

d. considers only the required increase in fixed assets.

Explanation

External financing is of two types debt and equity financing The amount of external funds needed will be equal to the expected increase in assets at the higher sales level, and that will be reduced by the immediate increase in liabilities orignate from the initiative, and will again reduced by any increase in retained earnings. And there is direct relationship between external financing and dividend pay out

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm wishes to maintain a growth rate of 13.2 percent and a dividend payout ratio...
A firm wishes to maintain a growth rate of 13.2 percent and a dividend payout ratio of 36 percent. The ratio of total assets to sales is constant at 0.70, and profit margin is 7.9 percent. If the firm also wishes to maintain a constant debt-equity ratio, what must it be?
HELLO, PLEASE SELECT THE CORRECT ANSWER: 1. If a firm wants to maintain its present ratio...
HELLO, PLEASE SELECT THE CORRECT ANSWER: 1. If a firm wants to maintain its present ratio of debt to equity, its present dividend payout ratio, and does not want to sell any new equity, the firm's growth rate in sales and assets must be less than or equal to its: A. dividend payout ratio. B. retention ratio. C. sustainable growth rate. D. growth rate with no external financing. E. projected sales growth rate. 2. All else the same, the level...
4. Currently, the dividend-payout ratio (D/E) for the aggregate market is 60 percent, the required return...
4. Currently, the dividend-payout ratio (D/E) for the aggregate market is 60 percent, the required return (k) is 11 percent, and the expected growth rate for dividends (g) is 5 percent. a. Compute the current earnings multiplier b. You expect the D/E payout ratio to decline to 50 percent, but you assume there will be no other changes. What will be the P/E? c. Starting with the initial conditions, you expect the dividend-payout ratio to be constant, the rate of...
Lullaby Lane Bedding Inc. needs to determine the amount of growth the firm could experience without...
Lullaby Lane Bedding Inc. needs to determine the amount of growth the firm could experience without having to obtain external financing. The current sales level is $800,000, the net profit margin is 6%, and the dividend payout ratio is 40%. Assume the firm is currently operating at full capacity and all assets will increase proportionately with sales. Lane’s current balance sheet follows: Cash $ 30,000 Accounts Payable $140,000 Accounts Receivable 90,000 Notes Payable 50,000 Inventories 110,000 Long-term Debt 280,000 Net...
Computing the Dividend Yield and the Dividend Payout Ratio The income statement, statement of retained earnings,...
Computing the Dividend Yield and the Dividend Payout Ratio The income statement, statement of retained earnings, and balance sheet for Jeanette Company are as follows. Jeanette Company Income Statement For the Year Ended December 31, 20X2 Amount Percent Net sales $8,281,989 100.0% Less: Cost of goods sold (5,383,293) 65.0 Gross margin $2,898,696 35.0 Less: Operating expenses (1,323,368) 16.0 Operating income $1,575,328 19.0 Less: Interest expense (50,000) 0.6 Income before taxes $1,525,328 18.4 Less: Income taxes (40%)* (610,131) 7.4 Net income...
Part B: Dividend Payout and Growth Ratios Recall from Module 1 the following two ratios: Internal...
Part B: Dividend Payout and Growth Ratios Recall from Module 1 the following two ratios: Internal growth rate = (ROA ? RR) / [1-(ROA ? RR)] (Eq. 3-30) where RR = Retention ratio = (Addition to retained earnings)/Net income (Eq. 3-31) – The internal growth rate measures the amount of growth a firm can sustain if it uses only internal financing (retained earnings) to increase assets Sustainable growth rate = (ROE ? RR) / [1-(ROE ? RR)] (Eq. 3-33) –...
Which of the following is NOT a likely financing policy for a rapidly growing business? I....
Which of the following is NOT a likely financing policy for a rapidly growing business? I. If external financing is necessary, use debt to the point it does not affect financial flexibility. II. Maintain an aggressive leverage ratio to enjoy interest tax shields and inject additional discipline in respect to management incentives. III. Borrow funds rather than limit growth, thereby limiting growth only as a last resort. IV. Adopt a modest dividend payout policy that enables the company to finance...
The Expo Company has the most recent financial statements as follows. The current liabilities are consisted...
The Expo Company has the most recent financial statements as follows. The current liabilities are consisted solely of accounts payables. The company maintains a constant dividend payout ratio. The projected sales growth over the next year is 10%. If the Expo Company does not want to incur any additional external financing, what is the maximum rate of growth the firm could achieve? Income Statement Balance Sheet Assets Liabilities and Owners' Equity Sales 4,200.0 Current Assets 900.0 Current Liabilities 500.0 Costs...
Emerson Company has total assets of $1,575,000, long-term debt of $630,000, stockholders' equity of $819,000, and...
Emerson Company has total assets of $1,575,000, long-term debt of $630,000, stockholders' equity of $819,000, and current liabilities of $126,000. The dividend payout ratio is 35 percent and the profit margin is 10 percent. Assume all assets and current liabilities change spontaneously with sales and the firm is currently operating at full capacity. What is the external financing need if the current sales of $2,100,000 are projected to increase by 15 percent?
When computing external financing needed, A. you’ll need to construct a current year income statement in...
When computing external financing needed, A. you’ll need to construct a current year income statement in order to determine the retention ratio. B. Generally assets will increase proportionate to sales. C. Total assets must be equal to total liabilities plus total owners equity. D. Both A and C. e. All of the above.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT