Question: True or False? Explain why true and why false. A firm's profit margin is 5%, its debt/assets ratio is 56%, and its dividend payout ratio

True or False? Explain why true and why false.

A firm's profit margin is 5%, its debt/assets ratio is 56%, and its dividend payout ratio is 40%. If the firm is operating at less than full capacity, then sales could increase to some extent without the need for external funds, but if it is operating at full capacity with respect to all assets, including fixed assets, then any positive growth in sales will require some external financing.

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