4. Sustainable growth As a firm grows, it must support increases in revenue with new...
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4. Sustainable growth As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Fuzzy Button Clothing Company has no debt in its capital structure and has $200 million in assets. Its sales revenues last year were $80 million with net income of $5 million. The company distributed $1.70 million as dividends to its shareholders last year. What is the firm's self-supporting, growth rate? (Note: Do not round your intermediate calculations.) O 0.86% 0 3.47% 0 1.68% O 1.15% Which of the following are assumptions of the self-supporting growth model? Check all that apply. The firm maintains a constant net profit margin. Common stock is the firm's only form of equity. The firm uses all equity and no debt financing. The firm maintains a constant ratio of liabilities to equity
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