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Return on Asset x Retention ratio - Case Study Example

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nternal growth rate= (Return on Asset x Retention ratio)/1-(Return on Asset x Retention ratio)
Return on Asset= 2,029,766/19,986,170=0.10…

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Subject: Finance & Accounting
Type: Case Study
Level: Ph.D.
Pages: 1 (250 words)
Downloads: 2
Author: vincenzo42

Extract of sample "Return on Asset x Retention ratio"

Internal growth rate= (Return on Asset x Retention ratio Return on Asset x Retention ratio) Return on Asset= 2,029,766/19,986,170=0.10 Retention ratio= 1-dividend pay-out; Dividend pay-out= 610,000/2,029,766=0.3 1-0.3=0.7 IGR= (0.1 X 0.3)/1-(0.1 X 0.3) 0.03/0.97=0.031 3.1% Sustainable Growth Rate= (Net income/ Shareholder’s equity) x (1-retention ratio) (2,029,766/11,435,815) x (1-0.7) 0.18 x 0.3=0.053 5.3% Question two Forecasted sales; 40,259,230(1 +0.12) = $ 45,090,338 EFN=Increase in asset-increase in liabilities-increase in retained earnings.

Increase in asset= 19,986,170 x .12= Increase in liabilities= 8,550,000 x .12 Increase in retained earnings= 40,259,230(1+0.12) x x 0.7

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