Question

Sustainable Growth Rate - Company A reports the following information in a recent financial statement ($ millions except for Earnings per shares and Dividends per share).

Company A	Year 1	Year 2	Year 3
Sales	$56,741	$68,222	$83,503
Net income	8,684	10,340	12,075
Shareholder equity	62,908	66,760	69,494
Earnings per share	2.79	3.22	3.86
Dividends per share	1.15	1.28	1.45

(a) Use the above information to compute Company A sustainable growth rate for Years 2 and 3? Comment on Company A sustainable growth rate relative to its actual rate of growth? (Include formulas used to solve problem).

Sustainable Growth Rate - Company B reports the following information in a recent financial statement ($ millions except for Earnings per share and Dividends per share).

Company B	Year 1	Year 2	Year 3
Sales	$401,087	$405,132	$418,952
Net income	13,880	14,883	16,993
Shareholder equity	66,763	72,648	71,247
Earnings per share	3.36	3.74	4.20
Dividends per share	0.95	1.09	1.21

(b) Use the above information to compute Company B sustainable growth rate for Years 2 and 3? Comment on Company B sustainable growth rate relative to its actual rate of growth? (Include formulas used to solve problem).

Sustainable Growth Rate - Company C reports the following infomration in a recent financial statement ($ millions except for Earnigns per share and Dividends per share).

Company C	Year 1	Year 2	Year 3
Revenues	$58,437	$62,484	$69,943
Net income	14,569	18,760	23,150
Shareholder equity	39,558	46,175	57,083
Earnings per share	1.63	2.13	2.73
Dividends per share	0.52	0.52	0.64

(c) Use the above information to compute Company C sustainable growth rate for Years 2 and 3? Comment on Company C sustainable growth rate relative to its actual rate of growth? (Include formulas used to solve problem).

Answer 1