Question

The income statement and balance sheet for GUS, Inc. are provided below. (Note that the reported figures in the statements are expressed in thousands of dollars.) GUS, INC. Balance Sheets as of December 31, 2018 and 2019 (in 000s) 2018 2019 2018 2019 Assets Liabilities and Owners' Equity Current assets Current liabilities Cash $ 100 $ 175 Accounts payable $ 300 $ 380 Accounts receivable 300 275 Notes payable 500 560 Inventory 450 500 Total $ 850 $ 950 Total $ 800 $ 940 $ 700 $ 800 Long-term debt Owners' equity Common stock Accumulated retained earnings 218 $ 150 $ $ 200 $ Fixed assets 292 Net plant and equipment $ 1,000 $ 1,300 Total $ 350 $ 510 Total assets $ 1,850 $2,250 Total liabilities and owners' equity $ 1,850 $ 2,250

Answer 1

1)

Operating cash flow(net income+depreciation)=276+50	326
Capital spending (increase in plant and equipment) =1300-1000	-300
Change in Net working capital (140-25)	115
Cash flow from assets
Cash flow to creditors
Cash flowto stakeholders (Dividends)	-184

Cash from financing activities (fresh capital of 68 and long term debt of 100)

168

2)

Internal growth rate =Net income /Avg Total Assets*(1-dividends/Earnings)

IGR=276/3175*(1-(184/276))*100=2.897%

SGR=276/605*(1-(184/276))*100=15.206%

Note: FOR SGR in the place of Avg Total Assets Average equity is to be taken)

3)

A company's sustainable growth rate is achieved without change in the financing pattern but internal growth rate is achieved only by financing through equity.