Question

Under Armour, Inc. is an American supplier of sportswear and casual apparel. Following are selected financial data for the company for the period 2009–2013.

	2009		2010		2011		2012		2013
Profit margin (%)	5.6		6.5		6.7		7.1		7.1
Retention ratio (%)	100.0		100.0		100.0		100.0		100.0
Asset turnover (X)	1.6		1.6		1.6		1.6		1.5
Financial leverage (X)	1.7		1.7		1.9		1.8		1.9
Growth rate in sales (%)	18.7		24.8		39.0		25.2		27.7

a. Calculate Under Armour’s annual sustainable growth rate for the years 2009 through 2013. (Round your answers to 1 decimal place.)

Answer 1

	2009	2010	2011	2012	2013
Profit Margin %	5.6	6.5	6.7	7.1	7.1
Retention Ratio %	100.0	100.0	100.0	100.0	100.0
Asset Turnover	1.6	1.6	1.6	1.6	1.5
Financial Leverage	1.7	1.7	1.9	1.8	1.9
Growth rate in sales %	18.7	24.8	39.0	25.2	27.7
ROE %	24.2	28.1	31.1	31.8	30.9
Sustainable Growth Rate	2%	3%	3%	3%	3%

ROE = Profit Margin * Asset Turnover * (1 + Financial Leverage)

Sustainable Growth Rate = (ROE * Retention Ratio) / (1 - ROE * Retention Ratio)