Which one of the following will increase the sustainable rate of growth a corporation can achieve?
A) avoidance of external equity financing
B) increase in corporate tax rates
C) reduction in the retention ratio
D) decrease in the dividend payout ratio
E) decrease in sales given a positive profit margin

Question

Quizplus · Accepted Answer

Decreasing the dividend payout ratio will increase the retained earnings, which can be reinvested to generate more profits, leading to an increase in the sustainable growth rate.

Which One of the Following Will Increase the Sustainable Rate