土豆妮

In computing the sustainable growth rate of a firm, the earnings retention rate is equal to:

A) Dividends / required rate of return.

B) 1 ? (dividends / assets).

C) 1 ? (dividends / earnings).

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Earnings retention rate = 1 ? (dividends / earnings).

土豆妮

The sustainable growth rate, g, equals:

A) earnings retention rate times the return on equity.

B) pretax margin divided by working capital.

C) dividend payout rate times the return on assets.

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The formula for sustainable growth is: g = b × ROE, where g = sustainable growth, b = the earnings retention rate, and ROE equals return on equity.