MoMoney Co.wants to increase its sustainable growth rate to 10%.If it maintains its 15% profit margin,25% retention ratio,and 0.25 liabilities to equity ratio,what must its total asset turnover value be?

Question

Quizplus · Accepted Answer

Sustainable growth rate = (Profit margin * Retention ratio * Total asset turnover) / (1 + Debt to equity ratio)10% = (15% * 25% * Total asset turnover) / (1 + 0.25)10% = (3.75% * Total asset turnover) / 1.25Total asset turnover = 10% * 1.25 / 3.75%Total asset turnover = 1.94