Question

A firm wishes to maintain an internal growth rate of 11 percent and a dividend payout ratio of 24 percent. The current profit margin is 7 percent and the firm uses no external financing sources. What is the total asset turnover (TAT)?

Answer 1

Answer:

assets turnover 1,8628

Explanation:

(1 - 0.24) = retention ratio (b) = 0.76

$IGR = \frac{ROA \times b}{1 - ROA \times b}$

0.11 = 0.76ROA/(1-0.76ROA)

0.11 x (1-0.76ROA) = 0.76ROA

.11 - 0,0836‬ROA = 0.76ROA

.11/0,8436 = ROA

0,1304 = ROA

income / assets = 0.1304

income / sales = 0.07

$\frac{income}{assets} \div \frac{income}{sales} \\\\\frac{income}{assets} \times \frac{sales}{income}\\\\\frac{sales}{assets}$

ROA / profit margin = turnover on assets:

0.1304 / 0.07 = 1,8628