A firm's profit margin is 5%, its debt 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. Would this be True or False and why?

a. True
b. False

External financing is not needed if a firm is to run at full capacity.This is because the aim of any business is to make profit. This means that when a firm is producing at its full capacity, the demand will increase and as such the firm' output will eventually

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deebikamadhivanan deebikamadhivanan · Answer 2 · 2021-12-09T17:45:56+01:00

Any type of business investment obtained from outside the company is referred to as external financing. Internal financing, on the other hand, consists primarily of profits kept by the company for investment.

Option B is the correct response to the question as it is a false scenario because;

If a company is to operate at full capacity, it does not require external capital.

This is due to the fact that the goal of any business is to make money.

This means that when a company is operating at full capacity, demand will rise, and as a result, the company's output will rise as well.

Therefore, the answer is false.

For more information regarding external financing, refer to the link:

https://brainly.com/question/15844722