Question

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.

Homework Answers

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)

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
Which of the following are assumptions of the self-supporting growth model? Check all that apply. The...
Which of the following are assumptions of the self-supporting growth model? Check all that apply. The firm pays out a constant proportion of its earnings as dividends. The firm uses all equity and no debt financing. The firm must issue the same number of new common shares that it issued last year. The firm will not issue any new common stock next year.
4. Sustainable growth As a firm grows, it must support increases in revenue with new investments...
4. Sustainable growth As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Fuzzy Button Clothing Company has no debt in its capital structure and has $300 million in assets. Its sales revenues last year were $150...
As a firm grows, it must support increases in revenue with new investments in assets. The...
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Fuzzy Button Clothing Company has no debt in its capital structure and has $100 million in assets. Its sales revenues last year were $30 million with a...
4. Sustainable growth As a firm grows, it must support increases in revenue with new investments...
4. Sustainable growth As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Bohemian Manufacturing Company has no debt in its capital structure and has $150 million in assets. Its sales revenues last year were $90 million...
4. Sustainable growth As a firm grows, it must support increases in revenue with new investments...
4. Sustainable growth As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Green Caterpillar Garden Supplies Inc. has no debt in its capital structure and has $150 million in assets. Its sales revenues last year were...
5. Sustainable growth As a firm grows, it must support increases in revenue with new investments...
5. Sustainable growth As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting, or sustainable, growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider the following case of Green Caterpillar Garden Supplies Inc.: Green Caterpillar Garden Supplies Inc. has no debt in its capital structure and has $150,000,000...
As a firm grows, it must support increases in revenue with new investments in assets. The...
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Green Caterpillar Garden Supplies Inc. has no debt in its capital structure and has $300 million in assets. Its sales revenues last year were $180 million with...
As a firm grows, it must support increases in revenue with new investments in assets. The...
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting, or sustainable, growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider the following case of Fuzzy Button Clothing Company: Fuzzy Button Clothing Company has no debt in its capital structure and has $300,000,000 in assets. Its sales revenues...
Please answer ALL questions 1) Self supporting growth rate represents what the firm can achieve if...
Please answer ALL questions 1) Self supporting growth rate represents what the firm can achieve if it had no access to external capital. True False 2) Which statement is not true: (Note: all statements assume other things held constant) a. The higher the firm’s spontaneous liabilities,the smaller AFN will be. b. The lower the payout ratio, the smaller AFN will be c. The higher the profit margin, the smaller AFN will be d. The higher the capital intensity ratio, the...
A firm has Net Income = $20 million from Sales = $150 million. The firm’s Debt...
A firm has Net Income = $20 million from Sales = $150 million. The firm’s Debt = $100 million, and the Book Equity = $100 million. a. What are the firm’s PROFIT MARGIN, ASSET TURNOVER, and ASSET/EQUITY MULTIPLE. b. If the firm wants to maintain its current Asset/Equity ratio, along with a payout ratio of 30% of Net Income, what is the firm’s sustainable growth rate? c. The firm is committed to keeping its Debt/Equity ratio constant in the future....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT