The Sustainable Growth Rate

question 71

Multiple Choice

The sustainable growth rate:

• A) increases as ROE decreases.
• B) increases as the payout ratio decreases.
• C) is maximized when the plowback ratio equals zero.
• D)is always less than the internal growth rate.

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Definitions:

Cash Received

The total amount of cash that an entity collects during a specific period, from various sources including sales, financing, or investments.

Bonds

Long-term debt securities issued by corporations or governments to raise capital, promising to pay the bearer a specified amount of interest over a set period until repayment of the principal.

Face Amount

The value of a financial instrument as stated on the instrument itself.

Bond Discount

Occurs when a bond is issued for less than its par (or face) value; the difference between the issue price and the par value.