When a firm enters Stage III of its life cycle, which of the following is NOT likely to be observed?
A) Dividend payout ratios are likely to rise to a moderate level of 20-30% of earnings.
B) More competition is likely to enter the firm's market.
C) Sales begin to decrease.
D) Stock splits are common.

Question

Quizplus · Accepted Answer

In Stage III of a firm's life cycle, sales are expected to continue increasing, although at a slower pace than in Stage II. Therefore, sales decreasing is not a typical observation in this stage. The other options are more likely to happen: dividend payout ratios may increase, competition may intensify, and stock splits may occur.

When a Firm Enters Stage III of Its Life Cycle