Which of the following is true when a firm is operating at the sustainable growth rate (SGR)?
A)The firm sells all of its inventory.
B)The firm's net income is zero.
C)The firm neither needs nor generates financing.
D)The firm pays a dividend equal to exactly half of its retained earnings.

Question

Quizplus · Accepted Answer

The sustainable growth rate (SGR) is the rate at which the firm can grow without needing external financing while maintaining a constant debt-to-equity ratio. This means that the firm neither needs nor generates financing at SGR. Options A, B, and D are all incorrect as they do not reflect the characteristics of a firm operating at its SGR.

Which of the Following Is True When a Firm Is