The Sustainable Rate of Growth

question 9

Multiple Choice

The sustainable rate of growth:

• A) increases as the dividend payout ratio increases.
• B) must be moderate over the long-term even if it is high in the short-term.
• C) assumes the debt-equity ratio will increase at the same rate as the growth rate.
• D) must exceed the required rate of return to be used in the dividend discount model.

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Definitions:

For-Profit Business

A type of enterprise that aims to earn profit for its owners through its operations and services.

Not-for-Profit Organization

An entity that operates for purposes other than generating profit, often focusing on social, educational, or charitable activities.

Private Property

The legal designation of the possession of property by non-governmental legal entities or individuals.

Private Enterprise System

An economic system where private individuals or groups have the right to own property and businesses and operate them for profit with minimal government interference.