Last year, Foley Inc.reported net fixed assets of $400, net working capital of $100, net income of $120, dividends of $70, and earnings retained in the period of $50.What is Foley Inc.'s internal growth rate?

Question

Quizplus · Accepted Answer

The internal growth rate is calculated as the retained earnings divided by the total assets. Retained earnings are $50, and total assets are $400 (net fixed assets) + $100 (net working capital) = $500. The internal growth rate is $50 / $500 = 0.10 or 10 percent.

Last Year, Foley Inc