A firm that is growing more slowly than its sustainable growth rate may face which of the following scenarios if it generates excess cash rather than make greater investments in its own business?
A)Use the excess cash to acquire other businesses.
B)Use the excess cash to increase dividends.
C)Do nothing and become "cash rich."
D)All of the above are realistic scenarios.

Question

Quizplus · Accepted Answer

A firm growing more slowly than its sustainable growth rate and generating excess cash might use that cash in several ways, including acquiring other businesses, increasing dividends, or simply holding onto the cash, becoming "cash rich." These options allow the firm to effectively utilize its excess resources.

A Firm That Is Growing More Slowly Than Its Sustainable