The Sustainable Growth Rate

question 60

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) cannot be greater than the internal growth rate.

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Definitions:

Unsecured Debt

Debt that is not backed by any collateral, meaning if the borrower defaults, the lender has no secured asset to claim for repayment.

Mortgage

A loan typically used to purchase property or real estate, where the property itself serves as collateral for the loan.

Title

The legal right to own, use, or dispose of something, particularly property or intellectual property.

Security

A financial instrument representing an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.