Firms that achieve higher growth rates without requiring external financing

Question

Quizplus · Accepted Answer

Firms that achieve higher growth rates without requiring external financing typically have a high plowback ratio, which means that they reinvest a large proportion of their earnings back into the business rather than paying them out as dividends. This leads to less need for external financing. Additionally, these firms may have less equity and/or are able to generate high net income leading to a high return on equity (ROE). Furthermore, they are likely not highly leveraged, as high levels of debt can increase the firm's risk and limit its ability to generate internal funds for growth.

Firms That Achieve Higher Growth Rates Without Requiring External Financing