Free

# Return on Asset x Retention ratio - Case Study Example

Summary
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…

## 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 Read More
Cite this document
• APA
• MLA
• CHICAGO
(“Return on Asset x Retention ratio Case Study Example | Topics and Well Written Essays - 250 words”, n.d.)
(Return on Asset X Retention Ratio Case Study Example | Topics and Well Written Essays - 250 Words)
https://studentshare.org/finance-accounting/1702306-return-on-asset-x-retention-ratio.
“Return on Asset X Retention Ratio Case Study Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/finance-accounting/1702306-return-on-asset-x-retention-ratio.
Click to create a comment or rate a document

## CHECK THESE SAMPLES OF Return on Asset x Retention ratio

### Analaysis ratio

...the desired returns and even if it does, it is not in proportion. ROCE is better in Tesco comparatively which represents that the company is providing expected and lucrative returns to both the financers and shareholders. Net Assets Turnover The net assets turnover analyzes how effectively the company is utilizing its asset in generating the sales revenue. Morrison’s net assets turnover ratio increased in the financial year 2009 as compared to 2008. Stable net asset turnover does not necessarily means that the company is making profits, as the ratio only compares gross sales to the...
2 Pages(500 words)Research Paper

### Ratio Analysis

.... The current ratio of the company stands at 2.96 (Million) which means the company can easily pay off short term debt not once, not twice but thrice. This is a very strong position to be in; Apple has no need to take loans because it can easily pay off debt. Acid-test ratio goes to show how quickly assets can be converted into liquid cash, Apple has an edge once again and this is hardly surprising. The acid-ratio of the company stands at 2.63 which signify the operating efficiencies of the company give it a huge edge over other companies. Assets turnover ratio stands at 1.42, this means the sales of the company has been picking up, and...
4 Pages(1000 words)Case Study

### Ratio Analysis

...which are objects of their analysis. It also plausible that ratios can be devised based on one’s objectives although there are financial ratios that are conventionally or more popularly used to assess firm performance and status. As pointed out by Gibson (1982, p. 22), for example, “firm executives have many different opinions on how a firm debt position should be determined from the balanced sheet.” Profitability ratios include measures for earnings per share, return on equity, profit margin, return on capital, return on assets, gross margin, pre-tax margin, and operating margin (Gibson 1982, p. 23). Each type of...
3 Pages(750 words)Essay

### Corporate Finance Stratergy

...and the liabilities would be increased by this amount too. However, some of the liabilities will be classified as short-term –the amount that is due to be repaid next year. This equals next year lease payment (\$1M) less the interest payment (10% x \$6.144M) = \$385,600. Therefore, the long term liability is \$6,144K - \$385.6K = \$ 5,758K. The equity remains unchanged. New Long-Term Debt = 10,000K + 5,758K 15,758K New Equity = 33,460K + 0K (No changes) 33,460K Long-Term Debt / Equity 15,758/33,460 = 0.47 Current Assets / Current Liabilities a. The guarantee of long-term debt would not affect current liabilities or current ratio and therefore the debt would remain the same i.e. 1.05. b. The...
7 Pages(1750 words)Assignment

### Ratio Analysis

...= (233,132-143,348) ? 151,952= (147,638-100,263)? 100,291= 0.59 0.47 iii).Cash Ratio Cash & Equivalents ? Current Liabilities= 71,139?151,952= 27,884?100,291= 0.47 0.28 b).Solvency Ratios i).Debt Ratio Total Liabilities? Total Assets= 151,952?311751= 100,291?206278 0.49 0.49 ii).Interest Coverage Ratio Earnings Before Interest & Tax(EBIT)?Interest Expense 54,670?328= 13,245? 364= 166.7 364.1 iii).Debt to Equity Ratio (Rich, 2010) Total Liabilities? Shareholders Equity= 151,952?159,799= 100,291?105,987= 0.950 0.946 c).Profitability Ratios i).Net Profit Margin Net Income ? Sales/revenues 54,670 ?769,396= 13,245?238,023=...
6 Pages(1500 words)Coursework

### Ratio

...working capital is being used to generate sales. The formula is: (net sales) / [(current assets)-(current liabilities)]. 8. Net Profit on sales ratio The net profit on sales ratio (also called the profit margin on sales) measures the company's profit per dollar of sales. The computed percentage shows the number of cents of each sales dollar remaining after deducting all expenses and income taxes. The formula is: (net profit) / (net sales). 9. Net profit to equity ratio The net profit to equity ratio (the return on net worth ratio) measures the rate of return on investment. Since it reports the...
2 Pages(500 words)Essay

### Financial ratio

...of paying its financial obligations (Current Ratio n.d.). With trend analysis, we can use graphs and patterns that we form out of the graph as forecasting tools to predict future prices and business status (Trend Analysis n.d.). Efficiency ratio is the most important financial ratios category since it explains the effective and efficient use of assets to reach the optimal productivity. Profitability of a company will be enhanced if the company assets are utilized to its optimal level. Also unwanted debts will be reduced if efficiency, as reflected by financial ratios, is realized in a company. Reference List Current...
2 Pages(500 words)Essay

### Ratio Analysis

...position and strategy. The discussed liquidity ratios of the company are the current ratio, acid test ratio and inventory turnover. They are of interest to the creditors to determine the firm’s ability to meet its short term financial obligations. So far the liquidity ratio of the company indicates that the liquid assets of the company are higher compared to its own average, meaning that the company as assets that can be easily be converted to cash. The indication of good liquidity ratio reduces the worry of the creditors since the business is at a position to easily pay its short term liabilities. Profitability...
1 Pages(250 words)Essay

### High return stocks, low return stocks, and

...research of their own. The larger companies made wise investment decisions in order to reach their current level of organizational growth, and therefore, it is usually a safe bet to entrust them with one’s money. The companies pay returns in the shape of dividends, and one can analyze the corresponding payout ratios to calculate his or her earnings. The investors must keep their money with those companies that are paying dividends on a frequent basis with lower level of risk exposure. References Fry, M. (1990). Saving, investment, growth and the cost of financial repression. World Development Vol 8 (4), 317–327. Vernon, R. (1966). International Investment and International Trade in the Product...
1 Pages(250 words)Essay

### S&S Air Company

...S&S AIR COMPANY 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 Pages(250 words)Case Study