The sustainable growth rate:
A) assumes there is no external financing of any kind.
B) is normally higher than the internal growth rate.
C) assumes the debt-equity ratio is variable.
D) is based on receiving additional external debt and equity financing.
E) assumes that 100% of all income is retained by the firm.

Question

Quizplus · Accepted Answer

The sustainable growth rate assumes that a firm will grow using internally generated funds and maintain a constant debt-equity ratio, which typically allows for some external financing, making it higher than the internal growth rate which assumes no external financing.

The Sustainable Growth Rate