Last year Foley Inc.reported total assets of $500,equity of $400,net income of $100,dividends of $50,and earnings retained in the period of $50.What is Foley Inc.'s sustainable growth rate?

Question

Quizplus · Accepted Answer

The sustainable growth rate (SGR) is calculated as ROE * (1 - dividend payout ratio). ROE = Net Income / Equity = $100 / $400 = 0.25 or 25%. The dividend payout ratio = Dividends / Net Income = $50 / $100 = 0.5. Therefore, SGR = 0.25 * (1 - 0.5) = 0.25 * 0.5 = 0.125 or 12.5%.

Last Year Foley Inc