Baxter Inc. is in a fast growing industry, but doesn't seem to be able to match its competitors' growth rates. Selected financial information for Baxter is as follows ($000):
Research has revealed that the average firm in Baxter's industry pays out 10% of its earnings in dividends, earns 4 cents after tax on every sales dollar, has an equity multiplier of 3.0 and a total asset turnover of 1.9.
a. Use a sustainable growth rate analysis in the following table to determine the source(s)of Baxter's growth problems.
b. What negatives might be associated with fixing the problems revealed by the analysis?
Definitions:
Beliefs
Convictions or acceptance that certain things are true or real, often without empirical evidence.
Attitudes
Mental and emotional entities that predispose an individual to respond to other people, objects, or institutions in a positive or negative way.
Dislikes
Feelings of aversion or distaste towards certain objects, individuals, or situations.
Personality
A set of enduring behavioral characteristics and internal predispositions for reacting to your environment.
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