The Three Major Functions of Business Organizations

question 2

Multiple Choice

The three major functions of business organizations:

• A)Are mutually exclusive
• B)Function independently of each other
• C)Interface with each other
• D)Do not interface with each other

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Definitions:

Maximum Growth Rate

The highest possible rate at which a company can expand its operations using only internal financing sources, without resorting to borrowing or issuing new equity.

Debt-equity Ratio

A metric that measures a company's financial leverage, calculated by dividing a company’s total liabilities by its shareholder equity.

Retention Ratio

The proportion of net income that is retained by a company rather than distributed to shareholders as dividends.

Sustainable Growth Rate

The maximum growth rate a firm can achieve without having to finance growth with additional equity or debt.