Question

The most recent financial statements for Live Co. are shown here: Income Statement Sales $15130 Costs...

The most recent financial statements for Live Co. are shown here:

Income Statement
Sales $15130
Costs $11288
Taxable Income ?
Taxes (40%) ?
Net Income ?
Balance Sheet
Current Asset $12262 Debt $16278
Fixed Asset $28304 Equity ?

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 25 percent dividend payout ratio. No external financing is possible.

What is the sustainable growth rate (in %)?

(Enter your answer as a percentage, omit the "%" sign in your response, and round your answer to 4 decimal places. For example, 1.23456% should be entered as 1.2346)

Homework Answers

Answer #1
Particulars Amount Formula
Sales $15,130
Costs $11,288
Taxable Income $3,842 =Sales - Cost
Taxes (40%) $1,537 =Taxable Income *40%
Net Income $2,305 =Taxable income-Taxes

STEP 1: Asset utilization Rate = Total Sales / Total Asset

i.e.{ $15,130 / ($12,262 + $28,304)} = 37.30%

STEP 2: Profitability rate = Net Income / Total Sales

i.e. ($2,305 / $15,130) = 15.24%

STEP 3: Financial Utilization Rate = (Total Debt / Total Equity) or Total Debt / (Total Asset - Total Debt)

i.e. {$16,278 / ($40,566 - $16,278)} = 67.02%

STEP 4: Return on Equity = Step 1 * Step 2 * Step 3

i.e. (37.30% * 15.24% * 67.02%) = 3.8085%

STEP 5: Retention Ratio = 100% - Dividend rate

i.e. 100% - 25% = 75%

STEP 6 = Sustainable Growth rate = Step 4 *Step 5

i.e. 3.8085% * 75% = 2.8564%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The most recent financial statements for Live Co. are shown here: Income Statement Sales $17662 Costs...
The most recent financial statements for Live Co. are shown here: Income Statement Sales $17662 Costs $10732 Taxable Income ? Taxes (40%) ? Net Income ? Balance Sheet Current Asset $13271 Debt $19035 Fixed Asset $27116 Equity ? Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 29 percent dividend payout ratio. No external financing is possible. What is the internal growth rate (in %)? (Enter your answer as a percentage, omit...
The most recent financial statements for Live Co. are shown here: Income Statement Sales $17892 Costs...
The most recent financial statements for Live Co. are shown here: Income Statement Sales $17892 Costs $10081 Taxable Income ? Taxes (40%) ? Net Income ? Balance Sheet Current Asset $11392 Debt $18298 Fixed Asset $28170 Equity ? Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 33 percent dividend payout ratio. No external financing is possible. What is the internal growth rate (in %)? (Enter your answer as a percentage, omit...
The most recent financial statements for Live Co. are shown here: Income Statement Balance Sheet Sales...
The most recent financial statements for Live Co. are shown here: Income Statement Balance Sheet Sales $19,000 Current assets $40,970 Debt $40,379 Costs 11,400 Fixed assets 28,669 Equity 29,260 Taxable income $7,600 Total $69,639 Total $69,639 Taxes (33%) 2,508 Net income $5,092 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 36 percent dividend payout ratio. No external equity financing is possible. Required: What is the sustainable growth rate? (Do not round...
The most recent financial statements for Xporter, Inc., are shown here: Income Statement Sales $7098 Costs...
The most recent financial statements for Xporter, Inc., are shown here: Income Statement Sales $7098 Costs $5920 Taxable Income ? Taxes (34%) ? Net Income ? Balance Sheet Current Asset $3800 Current Liabilities $2107 Fixed Asset $9822 Long Term Debt $3955 Equity ? Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 22 percent dividend payout ratio. As with every other firm in its industry, next year’s sales are...
The most recent financial statements for Mc Govney Co. are shown here: Income Statement Sales $47152...
The most recent financial statements for Mc Govney Co. are shown here: Income Statement Sales $47152 Costs $36870 Taxable Income ? Taxes (34%) ? Net Income ? Balance Sheet Current Asset $21260 Long-term Debt $48216 Fixed Asset $85534 Equity ? Assets and costs are proportional to sales. The company maintains a constant 19 percent dividend payout ratio and a constant debt–equity ratio. What is the maximum increase in sales (in $) that can be sustained assuming no new equity is...
The most recent financial statements for GPS, Inc., are shown here: Income Statement Sales $20451 Costs...
The most recent financial statements for GPS, Inc., are shown here: Income Statement Sales $20451 Costs $10165 Taxable Income ? Taxes (40%) ? Net Income ? Balance Sheet Assets $57251 Debt $21944 Equity ? Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1501 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to be $27432. What is the external financing needed? (Negative amount should be...
The most recent financial statements for Schenkel Co. are shown here: Income Statement Balance Sheet   Sales...
The most recent financial statements for Schenkel Co. are shown here: Income Statement Balance Sheet   Sales $ 18,100 Current assets $ 12,200 Debt $ 16,700   Costs 13,900 Fixed assets 29,500 Equity 25,000   Taxable income $ 4,200     Total $ 41,700     Total $ 41,700   Taxes (40%) 1,680     Net income $ 2,520 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 25 percent dividend payout ratio. No external equity financing is possible. What is the...
The most recent financial statements for Live Co. are shown here:   Income Statement Balance Sheet   Sales...
The most recent financial statements for Live Co. are shown here:   Income Statement Balance Sheet   Sales $4,000       Current assets $4,252     Debt $8,501     Costs 2,640       Fixed assets 10,409     Equity 6,160     Taxable income $1,360         Total $14,661     Total $14,661     Taxes (33%) 449         Net income $911     Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 22 percent dividend payout ratio. No external equity financing is possible. What is the fastest rate at which the...
The most recent financial statements for Xporter, Inc., are shown here: Income Statement Sales $7272 Costs...
The most recent financial statements for Xporter, Inc., are shown here: Income Statement Sales $7272 Costs $5543 Taxable Income ? Taxes (34%) ? Net Income ? Balance Sheet Current Asset $3922 Current Liabilities $2359 Fixed Asset $9835 Long Term Debt $3897 Equity ? Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 15 percent dividend payout ratio. As with every other firm in its industry, next year’s sales are...
The most recent financial statements for Burnaby Co. are shown here: Statement of Comprehensive Income Statement...
The most recent financial statements for Burnaby Co. are shown here: Statement of Comprehensive Income Statement of Financial Position   Sales $ 14,200 Current Assets $ 11,100 Debt $ 15,600   Costs 8,500 Fixed Assets 26,750 Equity 22,250   Taxable Income $ 5,700     Total $ 37,850     Total $ 37,850   Taxes (40%) 2,280     Net Income $ 3,420 Assets and costs are proportional to sales. Debt and equity are not. Burnaby maintains a constant 40 percent dividend payout ratio. No external equity financing is possible....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT