The Sustainable Growth Rate

question 19

Multiple Choice

The sustainable growth rate:

• A)assumes there is no external financing of any kind.
• B)assumes no additional long-term debt is available.
• C)assumes the debt-equity ratio is constant.
• D)assumes the debt-equity ratio is 1.0.
• E)assumes all income is retained by the firm.

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Definitions:

Vacation Pay Payable

A liability account that records the amount of vacation pay owed to employees but not yet paid.

Current Liability

Financial obligations a company is required to pay within a year.

Product Warranty Expense

Costs associated with repairing or replacing defective products under warranty.

Replacement Warranty

A guarantee provided to a purchaser of a product that a defective item will be replaced within a specified period of time.