Managers Sometimes State a Target Growth Rate for Sales or Earnings

question 82

Essay

Managers sometimes state a target growth rate for sales or earnings per share. Do you think that either makes sense as a corporate goal? If not, why do you think that managers focus on them?

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Definitions:

Financial Risk

The possibility of losing money on an investment or business venture due to various factors like market volatility or credit risk.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.

WACC

WACC stands for Weighted Average Cost of Capital, a calculation used to assess the average cost of a company's financing sources including equity, debt, and other securities.

Optimal Capital Structure

The best mix of debt, equity, and other financings that maximizes a company's market value while minimizing its cost of capital.