Question: The Smith Company has determined 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
Q1. What is Smith's sustainable growth rate in sales?
Q2. Can Smith's actual growth rate in sales be different from its sustainable growth rate? Why or why not?
Q3. How can Smith change its sustainable growth rate?