If a Venture Has a Return on Assets (ROA)of 10

question 56

Multiple Choice

If a venture has a return on assets (ROA) of 10%, an equity multiplier based on beginning equity of 3.5 times, and a retention rate of 50%, the sustainable growth rate would be:

• A)10.0%
• B)17.5%
• C)20.0%
• D)35.0%

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Definitions:

Operating Activity

Activities that involve the core business operations of a company, such as selling, managing, and producing goods and services.

Paying Interest

The act of providing compensation to lenders for the use of borrowed money, usually calculated as a percentage of the principal amount.

Lenders

Individuals or institutions that provide funds to others under the agreement that the funds will be repaid, typically with interest.

Double-Entry Bookkeeping

An accounting system where every entry to an account requires a corresponding and opposite entry to a different account, ensuring the accounting equation remains balanced.