If any firm with a positive net worth is operating its fixed assets at full capacity, if its dividend payout ratio is 100 percent, and if it wants to hold all financial ratios constant, then for any positive growth rate in sales, the firm will require external financing.

Question

Quizplus · Accepted Answer

If the dividend payout ratio is 100 percent, then the firm will not have any retained earnings to fund any growth in sales. As a result, it will need to seek external financing to fund its growth.

If Any Firm with a Positive Net Worth Is Operating