Which of the Following Is the Correct Formula for Calculating

question 11

Multiple Choice

Which of the following is the correct formula for calculating sustainable growth rate?

• A) Sustainable growth rate = Return on sales × Return on equity
• B) Sustainable growth rate = Retention ratio × Return on equity
• C) Sustainable growth rate = Retention ratio × Return on assets
• D) Sustainable growth rate = Return on sales × Return on assets

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Definitions:

Financial Information

Data about a company's financial activities, including income, expenses, assets, liabilities, and equity, used by stakeholders to make informed decisions.

Omission

The act of leaving out or neglecting to include or do something, often resulting in incomplete information or tasks.

Qualitative Characteristics

Attributes that make the information provided in financial statements useful to users, such as relevance and reliability.

Understandability

A principle in accounting that financial information should be presented in a clear and concise manner, making it easily understandable by users.