A firm can achieve a higher growth rate (within limits)without raising external capital by

Question

Quizplus · Accepted Answer

The plowback ratio is the amount of earnings reinvested into the firm rather than paid out as dividends. By increasing the plowback ratio, the firm is putting more of its earnings back into the business for growth without having to raise external capital. Therefore, increasing the plowback ratio is the best choice to achieve higher growth without raising external capital. The other options are incorrect because increasing the proportion of debt in the capital structure may increase financial risk and decrease investment opportunities, increasing the current ratio may indicate a decrease in efficiency, and decreasing the inventory turnover may result in excess inventory and increased holding costs.

A Firm Can Achieve a Higher Growth Rate (Within Limits)without