Net CorpHas an ROE of 30% and Would Like to See

question 54

Multiple Choice

Net Corp.has an ROE of 30% and would like to see earnings grow at a 18% annual rate.What percent of earnings can they afford to pay out as dividends?

• A)45%
• B)40%
• C)35%
• D)30% Growth in earnings = Plowback x ROE
• )18 = Plowback x .30
• )18/.30 = 60% = Plowback

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Definitions:

Inventory Turnover Rate

A measure of how many times a company's inventory is sold and replaced over a specified period, indicating the efficiency of inventory management.

Net Income

Profit remaining after all expenses, taxes, and deductions have been subtracted from total revenue.

Accounts Receivable

Accounts receivable are the amounts owed to a company by its customers for goods or services delivered but not yet paid for.

Net Sales

Revenue from sales transactions after deducting returns, allowances for damaged or missing goods, and discounts.