If a Firm Makes an Economic Profit, It Is Making

question 108

True/False

If a firm makes an economic profit, it is making at least a normal rate of return.

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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.