The sustainable growth rate:
A)assumes there is no external financing of any kind.
B)is normally higher than the internal growth rate.
C)assumes the debt-equity ratio is variable.
D)is based on receiving additional external equity financing.
E)assumes the dividend payout ratio is equal to zero.

Question

Quizplus · Accepted Answer

The sustainable growth rate assumes that a firm will grow at a rate that can be supported by its existing equity and debt levels, without needing additional external equity financing. It is typically higher than the internal growth rate, which assumes no external financing at all.

The Sustainable Growth Rate