Question

For a zero-growth firm, it is possible to increase the percentage of sales that are made on credit and still keep accounts receivable at their current level, provided the firm can shorten the length of its collection period sufficiently. a) True b) False

Answer 1

The answer is true. This strategy, as its name implies, counts on the company always paying the same dividend rate. This indicates that the dividend amount will rise by zero or not at all.

Hence the moniker Zero Growth strategy. In the zero-growth model, dividends are assumed to remain constant throughout time, i.e., there is no dividend growth. The annual dividend rate.by the needed rate of return would then equal the stock price. Annual Dividends / Required Rate of Return equals the intrinsic value of a stock. A zero growth economy (ZGE) would have a starting point, or a level of output that remains constant moving forward.

To learn more about dividend rate, click here.

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