Question

Dj's has a total asset turnover rate of 1.13, an equity multiplier of 1.46, a profit margin of 5.28 percent, a retention ratio of .74, and total assets of $138,000. what is the sustainable growth rate? 6.89 percent 7.04 percent 6.98 percent 7.33 percent 7.21 percent

Answer 1

asset turnover rate = 1.13,  
equity multiplier = 1.46
 profit margin = 5.28 %
 retention ratio =.74
 total assets = $138,000.
  sustainable growth rate = [(profit margin x asset turnover rate x equity
multiplier ) x retention ratio] / [1 - (profit margin x asset turnover rate x equity
multiplier ) x retention ratio)}
 =[(0,0528 x 1.13 x 1.46) x 0.74] / [(1 - (0,0528 x 1.13 x 1.46)) x 0.74]
 = 0.0644 / 0.9355 = 0.0688 = 6.88 prcent.