If a Firm Bases Its Growth Projection on the Rate

Multiple Choice

If a firm bases its growth projection on the rate of sustainable growth, and shows positive net income, then the:

A) fixed assets will have to increase at the same rate, regardless of the current capacity level.
B) number of common shares outstanding will increase at the same rate of growth.
C) debt-equity ratio will have to increase.
D) debt-equity ratio will remain constant while retained earnings increase.
E) fixed assets, debt-equity ratio, and number of common shares outstanding will all increase.