Purchase Solution

Companies cannot grow faster than sustainable growth rate

Not what you're looking for?

Ask Custom Question

An investor asserts: "A company cannot grow faster than its sustainable growth rate." True or false? Explain why.

Just less than 300 words answering why an investor may assert, "A company cannot grow faster than its sustainable growth rate." References.

Purchase this Solution
Solution Summary

A short discussion on why an investor asserts a company needs to stay within its sustainable growth rate to decrease risks and increase chances of long-term sustainability

Solution Preview

An investor asserts: "A company cannot grow faster than its sustainable growth rate." True or false? Explain why.

The answer is true. A company cannot grow faster than its sustainable growth rate. Sales grow as fast as assets are available. Increasing sales by 20% equates to increasing receivables, inventories, and fixed assets by 20%. Loans received for growth will not exceed debt-to-ratio ...

Purchase this Solution
Free BrainMass Quizzes
Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

View More Free Quizzes
Related BrainMass Solutions

  • Measuring Inflation - Balanced Budget

    In the case of a, where growth is 5% and interest rates are also, the debt is sustainable at d=0. In scenario b, where interest rates exceed the growth rate, the debt is not sustainable when d=0.

  • international trade

    Less developed countries that open their economies to international trade and capital flows grow faster. To an extent this statement is correct; the GDP growth of the country shows a high growth rate. How does this growth take place?

  • Sustainable growth rate

    The sustainable growth rate (SGR) suggests the rate that the company should grow at if it does not want to change its debt to equity ratio.

  • Adverse Selection, Moral Hazard, and Finance

    As the ROE is same and the dividend payout ratio is 50%, then, in this situation, we have a sustainable growth rate=20%*(1-50%)=10% What does the term "Sustainable Growth Rate" mean?

  • constant growth Vs. multi stage growth model for valuation

    Two-Stage cash flow model: Compared to constant growth rate model, the two-stage cash flow model is designed to value a firm that is expected to grow much faster than a stable firm in the initial period and at a stable rate after the initial faster growth

  • Internal Growth Rate and Sustainable Growth Rate for S&S Air

    Calculate the 2013 internal growth rate and sustainable growth rate for S&S Air. What do these numbers tell you about S&S Air and its ability to grow? Explain.

  • Sustainable growth rate

    142577 Sustainable Growth Rate for MBI Company The MBI Company does not want to grow. The company's financial management believes it has no positive NPV projects.

  • Sustainable Rate, Additional Borrowing, and Internal Rate

    (e.g., 32.16)) Sustainable growth rate % If it does grow at this rate, how much new borrowing will take place in the coming year, assuming a constant debt-equity ratio? (Do not round intermediate calculations.

  • Stock Valuation: Declining and Constant Growth Stock

    The growth rate cannot be assumed to grow faster than the industry forever. If this is the case then in long run, this company will take over all the industry. Thus, constant growth stock formula is applied only if g > rs?

View More Related Solutions