What is the sustainable growth rate of a firm with the following selected financial results? $\begin{array}{ll}
\text { Sales } & \$ 20,300 \
\text { Net income } & \$ 1,015 \
\text { Equity multiplier } & 2 \mathrm{x} \
\text { Assets } & \$ 10,150 \
\text { Annulal Dividend } & \$ 406
\end{array}$

Question

Quizplus · Accepted Answer

The sustainable growth rate is calculated as the retention ratio multiplied by the return on equity. The retention ratio is calculated as 1 minus the dividend payout ratio, which is the dividend per share divided by the earnings per share. The return on equity is calculated as the net income divided by the shareholders' equity. In this case, the dividend payout ratio is 406/1015 = 0.4, the retention ratio is 1 - 0.4 = 0.6, the return on equity is 1015/10150 = 0.1, and the sustainable growth rate is 0.6 * 0.1 = 0.06 or 6%.

What Is the Sustainable Growth Rate of a Firm with the Following