[amp_mcq option1=”return on assets and the return on equity” option2=”dividend payout ratio and leverage” option3=”retention rate and the return on equity” option4=”net profit margin and total sales” correct=”option3″]<\/p>\n
The correct answer is C. retention rate and the return on equity.<\/p>\n
The sustainable growth rate of a firm is the maximum rate at which a firm can grow without having to raise additional equity capital. It is calculated as the product of the retention rate and the return on equity.<\/p>\n
The retention rate is the proportion of net income that a firm reinvests in the business. The return on equity is the rate of return that a firm earns on its equity capital.<\/p>\n
The sustainable growth rate is a useful tool for managers to assess the long-term growth potential of their firms. It can also be used to evaluate the financial performance of firms.<\/p>\n
A high sustainable growth rate indicates that a firm is well-positioned for long-term growth. A low sustainable growth rate indicates that a firm may need to raise additional equity capital in order to grow.<\/p>\n
The following are the explanations of each option:<\/p>\n
[amp_mcq option1=”return on assets and the return on equity” option2=”dividend payout ratio and leverage” option3=”retention rate and the return on equity” option4=”net profit margin and total sales” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-54965","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n