Question

Under Armour, Inc. is an American supplier of sportswear and casual apparel. Following are selected financial data for the company for the period 2009–2013.

	2009		2010		2011		2012		2013
Profit margin (%)	5.2		6.1		6.3		6.7		6.7
Retention ratio (%)	100.0		100.0		100.0		100.0		100.0
Asset turnover (X)	1.6		1.6		1.6		1.6		1.5
Financial leverage (X)	1.7		1.7		1.9		1.8		1.9
Growth rate in sales (%)	18.3		24.4		38.6		24.8		27.3

a. Calculate Under Armour’s annual sustainable growth rate for the years 2009 through 2013. (Round your answers to 1 decimal place.)

Year	Sustainable Growth Rate
2009		%
2010		%
2011		%
2012		%
2013		%

Answer 1

Calculation of Under Armour’s Annual Sustainable Growth rate

Annual Sustainable Growth rate = Retention Ratio * Return on Equity

Return on equity = Profit margin * Asset turnover * Financial leverage.

	2009	2010	2011	2012	2013
Retention Ratio (1)	100%	100%	100%	100%	100%
Profit Margin (2)	5.2%	6.1%	6.3%	6.7%	6.7%
Asset Turnover (3)	1.6	1.6	1.6	1.6	1.5
Financial Leverage (4)	1.7	1.7	1.9	1.8	1.9
Return on Equity (5)=[(2) * (3) * (4) ]	14.144%	16.592%	19.152%	19.296%	19.095%
Sustainable Growth rate = (1) * (5)	14.1%	16.592% or 15.6%	19.152% or 19.2%	19.296% or 19.3%	19.095% or 19.1%