Asked by Brianna Ellis on Jun 12, 2024
Verified
The internal growth rate of a firm is best described as:
A) The minimum growth rate achievable if the firm does not pay out any cash dividends.
B) The minimum growth rate achievable if the firm maintains a constant equity multiplier.
C) The maximum growth rate achievable without external financing of any kind.
D) The maximum growth rate achievable without using any external equity financing, while maintaining a constant debt-equity ratio.
E) The maximum growth rate achievable without any limits on the amount of debt financing used.
External Financing
Funds a company seeks from outside sources, such as loans, investor equity, or bonds, to finance its activities.
Internal Growth Rate
The maximum rate at which a company can expand its operations using only internally generated revenue and without resorting to external financing.
Equity Multiplier
A financial ratio that measures the portion of a company's assets financed by stockholders' equity, reflecting financial leverage.
- Define and distinguish between internal growth rate and sustainable growth rate.
Verified Answer
Learning Objectives
- Define and distinguish between internal growth rate and sustainable growth rate.
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