A company has a retention ratio of 80 percent. If the company's return on assets is 9.2 percent and the return on equity is 16.4 percent, what is the sustainable growth rate?

Name: A company has a retention ratio of 80 percent. If the company's return on assets is 9.2 percent and the return on equity is 16.4 percent, what is the sustainable growth rate?
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Question

Quizplus · Accepted Answer

Sustainable growth rate = retention ratio × return on equity
Sustainable growth rate = 0.8 × 0.164 = 0.1312 or 13.12%

A Company Has a Retention Ratio of 80 Percent