The Sustainable Growth Rate of a Firm Is Best Described

question 49

Multiple Choice

The sustainable growth rate of a firm is best described as the:

• A)minimum growth rate achievable assuming a 100 percent retention ratio.
• B)minimum growth rate achievable if the firm maintains a constant equity multiplier.
• C)maximum growth rate achievable excluding external financing of any kind.
• D)maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.
• E)maximum growth rate achievable with unlimited debt financing.

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Definitions:

Income

Cash inflow, customarily obtained at regular periods, as compensation for work or from investment outcomes.

Constraint

A limitation or restriction on the variables of a problem, often seen in economics as budget constraints affecting consumer choices.

Utility Function

A mathematical model that describes how a person ranks choices based on perceived utility, happiness, or satisfaction.

Consumption

The act of using goods and services by households or individuals, leading to the satisfaction of needs and wants.