The following table presents financial information for Boss Stores, Inc., a retail chain store in the U.S.

-Use the above information from Boss's annual financial statements.What is the sustainable sales growth rate for 2010?
A) - 17.6%
B) - 7.9%
C) 9.07%
D) 10.27%
E) 12.23%
F) 21.4%

Question

The following table presents financial information for Boss Stores, Inc., a retail chain store in the U.S.
 
-Use the above information from Boss's annual financial statements.What is the sustainable sales growth rate for 2010?
A) - 17.6% 
B) - 7.9% 
C) 9.07% 
D) 10.27% 
E) 12.23% 
F) 21.4%

Quizplus · Accepted Answer

The sustainable sales growth rate is calculated using the following equation:

Sustainable Sales Growth Rate = (Net Income Margin x Asset Turnover x Financial Leverage Ratio) / (1 - (Net Income Margin x Asset Turnover x Financial Leverage Ratio))

Plugging in the given values:

= (3.5% x 1.9 x 1.58) / (1 - (3.5% x 1.9 x 1.58))
= 9.07%

Therefore, the sustainable sales growth rate for 2010 is 9.07%.

The Following Table Presents Financial Information for Boss Stores, Inc