All of the following components are needed to calculate the internal growth rate except:
A) return on assets
B) retention rate
C) return on equity
D) earnings on assets

Question

Quizplus · Accepted Answer

The internal growth rate is calculated to estimate a firm's growth potential using only its own resources, without relying on external financing. It primarily depends on the return on assets (ROA) and the retention rate (the proportion of earnings not paid out as dividends). While return on equity (ROE) is a measure of profitability related to shareholders' equity, it is not directly used in calculating the internal growth rate. Earnings on assets is essentially another way to describe ROA, making return on equity the component not needed for this calculation.

All of the Following Components Are Needed to Calculate the Internal