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NISA [10]
3 years ago
11

otal asset turnover 2.6 Profit margin 6.6 % Equity multiplier 1.5 Payout ratio 25 % What is the sustainable growth rate?

Business
1 answer:
max2010maxim [7]3 years ago
6 0

Answer:Sustainable growth rate =0.19305=19.305%

Explanation:

Sustainable growth rate is calculated as

Return on equity X (1 - dividend payout ratio)

But

Return on equity = profit margin X total asset turnover X equity multiplier

= 6.6% X 2.6 X 1.5

= 0.2574 X 100

=25.74%

The dividend payout ratio is 25% or 0.25

Sustainable growth rate =25.74% X (1-0.25)

=0.2574 X 0.75

=0.19305 X 100

=19.305%

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