Which one of the following will increase the sustainable rate of growth a corporation can achieve?
A) avoidance of external equity financing
B) increase in corporate tax rates
C) reduction in the retention ratio
D) decrease in the dividend payout ratio
E) decrease in sales given a positive profit margin
F) None of the above.

Question

Quizplus · Accepted Answer

Decreasing the dividend payout ratio means the company is retaining more earnings, which can be used for future growth and investment opportunities, increasing the sustainable rate of growth. The other options listed would have a negative impact on the sustainable rate of growth.

Which One of the Following Will Increase the Sustainable Rate