Which one of these formulas is used to estimate a firm's growth rate?
A)Annual dividend / Current stock price
B)(1 - Dividend payout ratio)× r
C)Retention ratio × ROE
D)Retention ratio × ROA
E)(1 - Dividend payout ratio)× R

Question

Quizplus · Accepted Answer

The formula for estimating a firm's growth rate is the retention ratio multiplied by the return on equity (ROE). This is because growth can come from reinvesting earnings back into the company to generate more profits. The retention ratio measures the proportion of earnings that a company retains for reinvestment, while the ROE measures how efficiently the retained earnings are used to generate additional profits.

Which One of These Formulas Is Used to Estimate a Firm's