If a Venture Has a Return on Assets (ROA)of 12

question 34

Multiple Choice

If a venture has a return on assets (ROA) of 12%, an equity multiplier based on beginning equity of 3.0 times, and a sustainable growth rate of 18%, the retention rate would be:

• A)60%
• B)30%
• C)50%
• D)40%

---

Definitions:

Inventory

The range of products or goods that are held by a business for the purpose of resale, crucial for operations and financial health.

Working Capital Assets

Current assets that are used in the operation of a business and can be converted into cash within a year.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating the short-term financial health and operational efficiency.

Spontaneous Financing

Financing that occurs naturally as a company operates, such as trade credit that increases as sales increase.