A firm's sustainable growth rate can be calculated as the product of:
A) return on assets and the return on equity.
B) dividend payout ratio and leverage.
C) retention rate and the return on equity.
D) net profit margin and asset turnover.

Question

Quizplus · Accepted Answer

The sustainable growth rate is calculated as the retention rate (1 - dividend payout ratio) multiplied by the return on equity (ROE). This reflects the growth rate a firm can sustain without needing to increase financial leverage.

A Firm's Sustainable Growth Rate Can Be Calculated as the Product