What Would Help a Firm Boost Its Internal Growth Rate

question 16

Multiple Choice

What would help a firm boost its internal growth rate?

• A) Plowing back a low proportion of its earnings
• B) Achieving a high return on equity
• C) Decreasing reinvested earnings
• D) Maintaining a low sales-to-total assets ratio

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Definitions:

Marginal Revenue

The incremental revenue procured by selling an extra unit of a product or service.

Marginal Cost

The cost of producing one additional unit of a product or service, crucial for pricing and production decisions.

Purely Competitive Firm

A business operating in a market where there are many buyers and sellers of a homogeneous product with no single entity able to influence the market price.

Normal Profits

The minimum level of profit needed for a company to remain competitive in the market, also seen as the opportunity cost of capital.