Plowback ratio, long-term debt ratio, return on equity are three figures must remain constant to determine a firm's sustainable growth rate
Explanation:
Sustainable growth is the realistically achievable extension that a company could own outwardly falling into difficulties. A firm can simply improve financial support if there are assets that can be guaranteed and if its debt-to-equity ratio is sensible concerning its production.
The decrease in dividends typically wrecks the company's stock price. ROE estimates the profitability of a company by examining net income. If the company grows outside equity or expands its debt-equity ratio, it can arise at a greater rate than the sustainable growth rate. The company would require to acquire supplementary debt or equity to obtain up for this cash flow shortfall.
