The sustainable growth rate will be equivalent to the internal growth rate when,and only when:
A)a firm has no debt.
B)the growth rate is positive.
C)the plowback ratio is positive but less than 1.
D)a firm has a debt-equity ratio equal to 1.
E)the retention ratio is equal to 1.

Question

Quizplus · Accepted Answer

The sustainable growth rate equals the internal growth rate when a firm has no debt, as both rates depend on the firm's ability to grow using internally generated funds. Without debt, the firm's growth is solely financed through retained earnings, making these rates equivalent.

The Sustainable Growth Rate Will Be Equivalent to the Internal