Based on the following information,what is the sustainable growth rate of Hendrix Guitars,Inc.? $$\begin{array} { l l }
\text { Profit margin } & 5.60 \text { percent } \
\text { Total asset turnover } & 1.76 \
\text { Total debt ratio } & 0.66 \
\text { Payout ratio } & 70 \text { percent }
\end{array}$$

Question

Based on the following information,what is the sustainable growth rate of Hendrix Guitars,Inc.? $$\begin{array} { l l } 
\text { Profit margin } & 5.60 \text { percent } \
\text { Total asset turnover } & 1.76 \
\text { Total debt ratio } & 0.66 \
\text { Payout ratio } & 70 \text { percent }
\end{array}$$

Quizplus · Accepted Answer

Total debt ratio = 0.66 = TD/TATA/TD = 1/0.661 + TD/TE = 1/0.66D/E = 1/[(1/0.66) - 1] = 1.941176Return on equity = 0.056 × 1.76 × (1 + 1.941176) = 0.289882Retention ratio = 1 - 0.7 = 0.3Sustainable growth rate = (0.289882 × 0.3)/[1 - (0.289882 × 0.3)] = 9.52 percent

Based on the Following Information,what Is the Sustainable Growth Rate