Using spread sheets above:
1) What is the Sustainable Growth Rate?
2) What is the Internal Growth Rate?
3) What is the ROE?
4) What is the ROA?
5) What is the Profit Margin?
Homework Answers
1. Sustainable growth rate= retention ratio*Return on equity
retention ratio=retained earnings/Net income=570/845=67.46%
Return on equity (ROE)=Net Income/Average total equity=845/((6490+7310)/2)=12.25%
Sustaniable gowth rate=67.46%*12.25%=8.26%
2. Internal growth rate= retention ratio*Return on assets
Return on assets (ROA)=Net Income/Average total assets=845/((17185+17980)/2)=4.81%
Internal growth rate=67.46%*4.81%=3.24%
3&4. ROE and ROA are calculated above
5.Profit margin = EBIT/Sales=1930/9610=20.08%
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