What Proportion of Earnings Is Being Plowed Back into the Firm

question 74

Multiple Choice

What proportion of earnings is being plowed back into the firm if the sustainable growth rate is 8 percent and the firm's ROE is 20 percent?

• A)8 percent
• B)12 percent
• C)20 percent
• D)40 percent 8% = 20% x plowback

---

Definitions:

Total Cost Variance

The overall difference between the actual costs incurred and the standard or budgeted costs, across all categories of expenses.

Variable Factory Overhead

Costs of manufacturing that vary with the level of production output, such as utility costs for machinery.

Controllable Variance

The difference between the expected cost and the actual cost that management has the power to influence or control.

Fixed Factory Overhead

Regular, consistent expenses incurred in the operation of a factory that do not vary with production level, such as rent, salaries, and insurance.