Which of the following is true at the sustainable growth rate?
A) The firm sells all of its inventory.
B) The firm's net income is zero.
C) The firm neither needs nor generates financing.
D) The firm pays a dividend equal to exactly half of its retained earnings.

Question

Quizplus · Accepted Answer

The sustainable growth rate (SGR) is the maximum rate at which a company can grow without needing any external financing. In other words, the company is able to fund its growth through its own retained earnings. Therefore, the correct option is C as at the sustainable growth rate, the firm neither needs nor generates financing.

Which of the Following Is True at the Sustainable Growth