As per DuPont identity,
Return on Equity (ROE) = (Asset Turnover Ratio x Net Profit Margin x Equity Multiplier)*100
= (1.5 x 0.06 x 1.2)*100
= 10.8%
Now,
Sustainable Growth Rate = ROE x Retention Ratio
= 10.8% x (1-Payout Ratio)
= 10.8% x 68%
= 7.34%
Given the following financial ratios, what is the company's sustainable growth rate? (Hint: Use Dupont Identity)...
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