Question

You’ve collected the following information about Sully, Inc.:

Profit margin | = | 4.43 | % |

Total asset turnover | = | 3.40 | |

Total debt ratio | = | .26 | |

Payout ratio | = | 28 | % |

What is the sustainable growth rate for the company? **(Do
not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
**

Sustainable growth rate %

What is the ROA?

Return on assets %

Answer #1

Profit margin=Net income/Sales

Hence net income=0.0443Sales

Total asset turnover=Sales/Total Assets

Hence Sales=3.4Total assets

Total debt ratio=Total debt/Total assets

Hence Total debt=0.26Total assets

Total assets=debt+equity

Hence equity=(1-0.26)Total assets

=0.74Total assets

ROE=Net income/Total equity

=(0.0443Sales/0.74Total assets)

=(0.0443*3.4Total assets/0.74Total assets)

=0.20354054

Retention ratio=1-payout ratio

=(1-0.28)=0.72

SGR=(ROE*Retention ratio)/[1-(ROE*Retention ratio)]

=(0.20354054*0.72)/[1-(0.20354054*0.72)]

=**17.17%(Approx).**

ROA=

Net income/Total Assets

=(0.0443Sales/Sales/3.4)

=**15.06%(Approx).**

Assume the following ratios are constant. Total asset turnover =
2.30 Profit margin = 5.8 % Equity multiplier = 1.77 Payout ratio =
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intermediate calculations and enter your answer as a percent
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Total asset
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Total debt
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Net income
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