A firm wishes to maintain an internal growth rate of 11 percent and a dividend payout ratio of 24 percent. The current profit margin is 10 percent and the firm uses no external financing sources. What must the total asset turnover rate be?

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Quizplus · Accepted Answer

Retention ratio = 1 - 0.24 = 0.76Internal growth rate = 0.11 = (ROA F1F1F1S1F1F1F10 0.76)/[1 - (ROA F1F1F1S1F1F1F10 0.76)]; ROA = 0.1304Return on assets = 0.1304 = 0.10 F1F1F1S1F1F1F10 TAT; Total asset turnover = 1.30 times

A Firm Wishes to Maintain an Internal Growth Rate of 11