The sustainable rate of growth can be increased by
A)decreasing the equity multiplier.
B)increasing the profit margin.
C)decreasing the debt-equity ratio.
D)increasing the dividend payout ratio.
E)increasing the capital intensity ratio.

Question

Quizplus · Accepted Answer

Increasing the profit margin directly increases the sustainable rate of growth, as a higher profit margin means the firm can generate more earnings to reinvest in growth. Decreasing the equity multiplier, decreasing the debt-equity ratio, and increasing the capital intensity ratio can all lower the sustainable rate of growth. Increasing the dividend payout ratio may also lower the sustainable rate of growth, as the firm will have less earnings available to reinvest in growth.

The Sustainable Rate of Growth Can Be Increased by