All of the Following Statements Are Correct Except

question 64

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 minus the dividend payout ratio.
• C) The sustainable growth rate measures how quickly the firm can grow when it uses only 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:

Behavioral Economist

An economist who studies the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.

Individual Decision Making

The process by which an individual selects among alternative choices based on preferences, resources, and information.

Costly Temptations

Expenses incurred from yielding to desires that can lead to negative financial consequences.

Repeated Mistakes

The act of making the same errors multiple times, often hindering progress or learning in any context.