How Does the Prudent Man Rule Affect Asset Allocation

question 5

Essay

How does the prudent man rule affect asset allocation?

---

Definitions:

Constant Percentage

A fixed percentage rate applied to various mathematical and financial calculations.

Retains Earnings

Retains Earnings are the portion of net income that is not distributed to shareholders as dividends, but rather retained by the company for reinvestment or to pay off debt.

Sustainable Growth Rate

The maximum rate at which a company can grow its sales and earnings without needing to increase its financial leverage.

Ratios

Metrics derived from a financial analysis that provide insights into a company's performance, liquidity, profitability, and solvency.