The Major Objection to the Straight-Line Method Is That It

question 74

True/False

The major objection to the straight-line method is that it assumes the asset's economic usefulness and repair expense are the same each year.

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Definitions:

Sustainable Growth Rate

The maximum rate at which a company can grow its sales, earnings, and dividends without increasing its equity and while maintaining its existing debt-equity ratio.

Debt-Equity Ratio

A calculation to determine a business's leverage by dividing its liabilities by the equity of its stockholders.

External Equity Financing

This term refers to the process through which a company raises capital by selling its shares to external investors, outside the existing shareholders or company insiders.

Internal Growth Rate

The maximum growth rate a firm can achieve without external financing, based on reinvestment of its own earnings.