What Is the Sustainable Growth Rate for a Firm with Net

question 100

Multiple Choice

What is the sustainable growth rate for a firm with net income of $2.5 million,cash dividends of $1.5 million,and return on equity of 18%?

• A) 3.0%
• B) 5.4%
• C) 7.2%
• D) 10.8%

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Definitions:

Net Income to Net Sales

A financial ratio measuring a company's profitability by comparing net income to net sales.

Relationship

The way in which two or more concepts, objects, or people are connected, or the state of being connected.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits over a specified period of time, indicating the financial performance of the business.

Gross Profit

The difference between sales and the cost of goods sold, representing the fundamental earning efficiency of a company's core activities.