The General Store Has a 3% Profit Margin and a 20

question 356

Multiple Choice

The General Store has a 3% profit margin and a 20 percent dividend payout ratio. The total asset turnover is 1.80 and the debt-equity ratio is .40. What is the sustainable rate of growth?

• A) 1.53%
• B) 1.76 %
• C) 3.38 %
• D) 6.44%
• E) 7.56 %

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Definitions:

Cumulative Preferred Stock

A type of preferred stock that entitles shareholders to receive dividends in arrears before any dividends can be distributed to common stockholders.

Guaranteed Dividends

Dividends that are promised by a corporation to preferred shareholders, payable before any dividends are given to common shareholders.

Par Value

The nominal or face value assigned to a share of stock or a bond, used in legal documents and usually unrelated to market value.

Corporate Charter

A corporate charter is a legal document that establishes a corporation, setting forth its structure, powers, and objectives as granted by the state.