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A Firm's Planning Model Has Assets and Cash Proportional to Sales

Question 3

Multiple Choice

A firm's planning model has assets and cash proportional to sales. The firm maintains a constant dividend payout ratio and a constant debt to equity ratio. Keying in on the asset to sales ratio, the firm's sustainable growth is _________ the ________ the asset to sales ratio.


A) higher; higher
B) higher; lower
C) lower; lower
D) constant; higher
E) constant; lower

Correct Answer:

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