4. Sustainable growth As a firm grows, it must support increases in revenue with new...
80.2K
Verified Solution
Link Copied!
Question
Accounting
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:
Bohemian Manufacturing Company has no debt in its capital structure and has $150 million in assets. Its sales revenues last year were $90 million with a net income of $5 million. The company distributed $1.30 million as dividends to its shareholders last year.
What is the firms self-supporting, growth rate? (Note: Do not round your intermediate calculations.)
2.53%
4.38%
0.87%
0.74%
Which of the following are assumptions of the self-supporting growth model? Check all that apply.
The firm will not issue any new common stock next year.
The firm pays no dividends.
The firm pays out a constant proportion of its earnings as dividends.
The firms total asset turnover ratio remains constant.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
