All of the Following Statements Are Correct Except

question 107

Multiple Choice

All of the following statements are correct except:

• A) The internal growth rate measures how quickly a firm can increase its asset base over the next year without raising outside funds.
• B) The retention rate represents the proportion of every $1 of earnings per share that is retained by the firm; in other words, it is equal to one plus the dividend payout ratio.
• C) The sustainable growth rate measures how quickly the firm can grow when it uses both internal equity and debt financing to keep its capital structure constant over time.
• D) The internal and sustainable growth rate relationships suggest that there are three measurable influences on growth: dividend policy (as reflected in the retention rate), profitability (as measured by ROA), and the firm's capital structure (as measured by the equity multiplier).

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Definitions:

Principal Amount

The initial amount of money borrowed or invested, excluding any interest or dividends.

Equal Annual Payments

Regular payments of the same amount made over a specified period of time, often used in loans and annuities.

Installment Note

A debt instrument that requires a series of payments over time, typically including both principal and interest components.

Interest Portion

This term represents the part of a payment or financial obligation that covers the interest on a debt, distinct from the principal repayment.