Calculate the Sustainable Growth Rate for a Firm with a Profit

question 101

Essay

Calculate the sustainable growth rate for a firm with a profit margin of 8%, an asset turnover of 1.25, a total debt ratio of 45%, and a plowback ratio of 65%. Assuming that the ROE remains constant, how large can the sustainable growth rate become?

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Definitions:

Grandiose Sense

An inflated sense of one's importance, power, or identity, often found in narcissistic personality disorder.

Morally Superior

The belief or attitude that one's moral standards, actions, or beliefs are more virtuous or ethical than those of others.

Common Reaction

A typical or widespread response or behavior that people exhibit in a specific situation.

Concern

Concern refers to a feeling of worry or care about a particular issue or situation, often prompting individuals to take action or seek solutions.