1) A rapid rate of growth in sales and profits may require 

A) higher dividend payments to shareholders. 

B) increased borrowing by the firm to support the sales increase. 

C) the firm to be more lenient with credit customers. 

D) sales forecasts to be made less frequently. 

 

2) The after-tax cost of preferred stock to the issuing corporation 

A) is the same as the before-tax cost. 

B) is usually lower than the cost of debt. 

C) is dependent on the firm's tax bracket. 

D) none of the above. 

 

3) In break-even analysis the contribution margin is defined as 

A) sales minus variable costs. 

B) sales minus fixed costs. 

C) variable costs minus fixed costs. 

D) fixed costs minus variable costs. 

 

4) If sales volume exceeds the break-even point, the firm will experience 

A) an operating loss. 

B) an operating profit. 

C) an increase in plant and equipment. 

D) an increase in stock price. 

 

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