All else equal, a ﬁrm that utilizes assets ineﬃciently will have a higher sustainable growth rate than
a ﬁrm that does not.

Question

Quizplus · Accepted Answer

A firm that utilizes assets inefficiently will have a lower profit margin, which will constrain its ability to fund growth through retained earnings. Therefore, it will have a lower sustainable growth rate compared to a firm that efficiently utilizes its assets.

All Else Equal, a ﬁRm That Utilizes Assets Ineﬃciently Will