What is sustainable growth rate?

What is sustainable growth rate?

How do you interpret sustainable rate of growth?

The sustainable growth rate is the expected rate of growth a company will see over the long-term. The sustainable growth rate, also known as G, can be calculated by adding the earnings retention rate to the return on equity.

Which one of the following has the least effect on a firm’s sustainable rate of growth?

The return on equity is affected primarily by the capital intensity ratio, profit margin and debt-equity ratio. The sustainable growth rate does not depend on quick ratio. The correct answer is quick ratio.

What is Plowback ratio?

The plowback is a ratio used to measure the amount of earnings that are retained after dividends have been paid. This is also known as the retention rate. The payout ratio is the opposite measurement, which measures how much dividends are paid as a percentage earnings.

When construction is a pro forma statement net working capital generally?

When constructing a pro forma, net working capital generally: Varieties proportionally with sales. Pro forma statements indicate that sales and fixed assets will increase by 7 percent from their current levels.

What is the capital intensity ratio at full capacity?

The capital intensity ratio shows how many assets your business needs to generate $1 in sales. It is equal to total assets divided by annual revenue.

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What is the retention ratio quizlet?

3. The retention ratio is A. equals net income divided by total equity.

Which ratio identifies the amount of total assets a firm needs in order to generate $1 in sales?

Capital intensity ratio

Which one of these is a requirement if the sustainable growth rate is to exceed the internal growth rate?

Question – Which Of These Is a Requirement If the Sustainable Growth Rate Is To Exceed the Internal Growth Rate? The Net Working Capital must be greater than $0.

How do you calculate full capacity sales?

Actual sales Percentage at which fixed Assets were operated Next management would calculate the target fixed asset ratio for the firm as follows: Total fixed and Sales Actual fixed assets Pull sales Then management would combine the target fixed asset ratio with the projected …

What is the AFN equation?

The simplified formula for AFN is: AFN=A projected increase in assets – a spontaneous increase in liabilities – any increase in retained earnings. This value should be negative if the project or action is producing extra income that can be invested elsewhere.

How do you calculate maximum sales growth?

To begin, subtract the net sales from the current period. Divide the result by the net sale of the previous period. Multiply the result by 100 to get the percent sales growth.

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What does a high fixed asset turnover mean?

A high fixed asset turnover ratio is often a sign that a company uses its assets efficiently and effectively to generate revenue. Low fixed asset turnover rates are usually indicative of the opposite. A firm is not using its assets efficiently or to its full potential to generate revenues.

How do you interpret asset turnover ratio?

The asset turnover ratio is a measure of the company’s efficiency in generating sales or revenue. This ratio is calculated by dividing the company’s total assets (revenues) by its dollar sales. It is expressed as an annualized percentage. To calculate the asset turnover ratio, multiply net sales or revenue by average total assets.

What does a fixed asset turnover ratio of 4 times represent?

Fixed Asset Turnover Ratio Calculation Your fixed asset turnover ratio equals 4, or $800,000 divided by $200,000. This is 4 sales per $1 of fixed assets.

What does a current ratio of 2.5 times represent?

This means that its total assets would cover its liabilities 2.5 times. This ratio is often referred to as the liquidity or cash asset ratio. It shows how financially sound a company is, but also how efficient it is investing its assets.

How do you explain debt ratio?

The debt ratio can be defined as the ratio between total debt and total assets. It can be expressed as either a percentage or decimal. This can be defined as the percentage of assets owned by a company that is financed with debt. This means that the company has more assets than liabilities.

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Is it better to have a high or low debt ratio?

From a pure risk perspective, debt ratios lower than 0.4 are better. However, a higher debt ratio makes it more difficult for people to borrow money. A company with too much debt can be more creditworthy than a company with a lower debt ratio.

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