Financial Reporting and Analysis Q209
0. The following financial data is available for a company:
| ROA | 5.6% |
| Total asset turnover | 2.12 |
| Financial leverage | 1.89 |
| Dividend payout ratio | 52.3% |
The company’s sustainable growth rate is closest to:
- Option : B
- Explanation : Sustainable growth rate = retention ratio (b) × ROE. b = 1 - Dividend payout ratio = 1 - 0.523 = 0.477 ROE = ROA x Financial leverage = .056 x 1.89 = 0.10584 Sustainable growth rate = b x ROE = 0.477 x 0.10584 = 0.0505 = 5.05%.
