📈 CFA Exam Prep

The sustainable growth rate represents:

A GDP growth
B The maximum rate at which a firm can grow without external financing
C Industry growth rate
D Inflation rate

✓ Correct Answer: Option B

Sustainable growth rate = ROE × Retention ratio. It estimates maximum growth using only internal funds.

💡 Why is B) the correct answer?

The correct answer to the question "The sustainable growth rate represents:" is Option B: The maximum rate at which a firm can grow without external financing.

The other options — A) GDP growth, C) Industry growth rate, D) Inflation rate — are incorrect for this CFA Exam Prep question. As explained above: Sustainable growth rate = ROE × Retention ratio. It estimates maximum growth using only internal funds.

📚 About This CFA Exam Prep Practice Question

This 2-level CFA Exam Prep question from the Corporate Finance topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CFA Exam Prep practice test or use flashcards for spaced repetition review.

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