Assume that an average firm in the office supply business has a 6% profit margin, a 40%total

Question:

Assume that an average firm in the office supply business has a 6% profit margin, a 40%total liabilities/assets ratio, a total assets turnover of 2 times, and a dividend payout ratio of 40%. Is it true that if such a firm is to have any sales growth (g › 0), it will be forced to borrow or to sell common stock (that is, it will need some non spontaneous external capital even if g is very small)? Explain.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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