Calculate sustainable growth rate in sales


Question: The Stieben firm has estimated that the following will be true next year;

T = Ratio of total assets to sales = 1

P = Net profit margin on sales = 5%

d = Dividend-payout ratio = 50%

L = Debt-equity ratio = 1

[A] Calculate Stieben’s sustainable growth rate in sales?

[B] Can Stieben’s actual growth rate in sales be different from its sustainable growth rate? Explain your reasoning?

[C] How can Stieben change its sustainable growth?

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Finance Basics: Calculate sustainable growth rate in sales
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