A firm\'s net working capital and all of its expenses vary directly with sales.
ID: 2652215 • Letter: A
Question
A firm's net working capital and all of its expenses vary directly with sales. The firm is operating currently at 96 percent of capacity. The firm wants no additional external financing of any kind. Which one of the following statements related to the firm's pro forma statements for next year must be correct?
A- the firm cannot exceed its internal rate of growth.
The maximum rate of sales increase is 4 percent.
The projected owners' equity will equal this year's ending equity balance
Total liabilities will remain constant at this year's value.
Fixed assets must remain constant at the current level.
A- the firm cannot exceed its internal rate of growth.
B.The maximum rate of sales increase is 4 percent.
C.The projected owners' equity will equal this year's ending equity balance
D.Total liabilities will remain constant at this year's value.
E.Fixed assets must remain constant at the current level.
Explanation / Answer
A- the firm cannot exceed its internal rate of growth.
(If the firm actual growth rate temporary excess of the firm sustainable growth rate than the required cash (working capital) can (likely) be borrowed.)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.