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Which of the following are assumptions of the self-supporting growth model? Select all that apply. The...

Which of the following are assumptions of the self-supporting growth model? Select all that apply.

The firm’s total asset turnover ratio remains constant.

The firm maintains a constant net profit margin.

The firm maintains a constant ratio of assets to equity.

The firm must issue the same number of new common shares that it issued last year.

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Answer #1

Assumptions of self supporting model which is also known as sustainable rate growth model are as follows-

(B) The firm will be maintaining a constant net profit margin because net income is a constant proportion of sale

(C) Firm will be maintaining a constant ratio of asset to the equity and debt to equity ratio will be fixed.

(D) firm must issue same number of new equity share that is issued last year

Other statements will be false.

Correct answer option (b )(c) and ( d)

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