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.

Question

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If a firm's dividend payout ratio is 100%, then all its earnings are being distributed as dividends to shareholders, leaving no retained earnings for reinvestment in growth. Thus, if the firm wants to maintain its fixed assets at full capacity and hold all financial ratios constant, it will need to obtain financing externally to fund any increase in sales.

A Firm with a Positive Net Worth Is Operating Its