LOS k: Explain the growth phase, transitional phase, and maturity phase of a business.

Q1. In which of the following stages is a firm most likely to distribute the highest proportion of its earnings in the form of dividends?

A)   Transition stage.

B)   Initial growth stage.

C)   Mature stage.

Q2. In what stage of growth would a firm most likely NOT pay dividends?

A)   Transition stage.

B)   Declining stage.

C)   Initial growth stage.

Q3. Most firms follow a pattern of growth that includes several stages. The second stage of growth is referred to as the:

A)   H-stage.

B)   transitional stage.

C)   mature stage.

LOS k: Explain the growth phase, transitional phase, and maturity phase of a business. fficeffice" />

Q1. In which of the following stages is a firm most likely to distribute the highest proportion of its earnings in the form of dividends?

A)   Transition stage.

B)   Initial growth stage.

C)   Mature stage.

Correct answer is C)

As a firm matures, the forces of competition begin to deny it opportunities to earn greater than the required return. Faced with this situation, most earnings are distributed to shareholders as dividends. An alternate way of returning capital is through stock repurchases.

Q2. In what stage of growth would a firm most likely NOT pay dividends?

A)   Transition stage.

B)   Declining stage.

C)   Initial growth stage.

Correct answer is C)

During the initial growth stage, the firm is able to exploit opportunities to earn greater than the required return. During this stage, earnings are reinvested in the growth opportunities rather than returned to the investors.

Q3. Most firms follow a pattern of growth that includes several stages. The second stage of growth is referred to as the:

A)   H-stage.

B)   transitional stage.

C)   mature stage.

Correct answer is B)

The second stage is often referred to as the transitional stage. During this stage, the firm’s growth begins to slow as competitive forces build.

thanks a lot

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