Assignment: Sustainable Growth Rate
Financial Tools for Managers
Instructions:
You have been the Operations Manager for your company for the last five years and are preparing to ask for a large raise. You have just learned from a managerial finance seminar that:
Sustainable Growth Rate = %Profit Margin X % Retention Ratio X Asset Turnover X Financial Leverage.
You ask your CFO for the following data:
|
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
%Profit Margin
|
6.00
|
7.00
|
4.60
|
5.20
|
7.20
|
|
% Retention Ratio
|
99.50
|
100.00
|
100.00
|
100.00
|
100.00
|
|
Asset Turnover
|
1.33
|
2.02
|
1.92
|
2.07
|
2.64
|
|
Financial leverage
|
1.61
|
1.69
|
1.57
|
1.57
|
1.64
|
|
%Growth rate in sales
|
46.80
|
84.60
|
13.10
|
25.90
|
57.10
|
Based on the information above, answer the following questions:
1. Calculate the annual sustainable growth rate for each of the above years.
2. Compare the sustainable growth rate with actual growth rate in sales, what growth problems did management face over this period?
3. Explain how this data justifies a large raise for the Operations Manager.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.