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Up22
ROA = 4.8%
Total asset turnover = 1.92
Financial leverage = 1.75
Dividend payout ratio = 48.1%The company’s sustainable growth rate is closest to:
A. 4%
B. 4.40%
C. 4.78%The answer is B but I can’t figure out how to get there.
Could anybody tell me the calculation please?
(PS: how do I put a screenshot into the post? I can only put an image using a web link…)
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Up4
@lulu123 – upload your image to imgur.com and copy that link in
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Up3
@lulu123 – a hint first, you have to use the formula here for sustainable growth rate = Retention ratio x ROE
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Up2
g = RR x ROE
= (1- Div payout ratio) x (ROA x Financial Leverage)
= 51.9% x (NI/Avg Assets x Avg Assets/Avg Equity)
= 51.9% x (4.8% x 1.75)
= 4.36% -
Up1
Yea they threw in asset turnover for fun @lulu123. 😉 You’re welcome!
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