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TEA [102]
3 years ago
5

A company has a retention rate of 50%, sales of $25,000, beginning equity of $50,000 and profit margins of 10%, an asset turnove

r ratio of .75 and debt of $10,000. What is its sustainable growth rate?
Business
1 answer:
Degger [83]3 years ago
5 0

Answer:

Sustainable Growth Rate: 2.5%

Explanation:

Sustainable growth rate is calculated by multiplying return on equity with retention ratio.

Logic behind above is that whatever portion of net profit is retained by the Company, is used in the Company's operations, which earns certain percentage of equity known as return on equity. By multiplying both return on equity with retention ratio, we assume that the practice will continue for foreseeable future and the Company will continue to grow at the calculated growth rate.

Growth rate = Retention ratio * return on equity

Retention ratio = 50%

Return on equity = Net profit available for distribution / Opening equity

Return on Equity = (25,000 * 10%) / 50,000

Return on Equity = 5%

Growth Rate = 5% * 50%

Growth Rate = 2.5%

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baherus [9]

<u>Answer:</u> $735

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Calculation of regular earnings

Earnings at regular rate= Wage rate per hour x hours of work

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Total gross pay = 600+135

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The gross pay for martin is $735. The other deductions are made in the gross pay to arrive at the net pay. Deductions such as federal income tax, security tax rate and medicare tax rate is deducted from gross pay to find net pay.

5 0
3 years ago
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Answer:

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Explanation:

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7 0
3 years ago
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