Chapter 4 a. Use the information below from Tournment Sporting Goods\'s annual f
ID: 2778430 • Letter: C
Question
Chapter 4 a. Use the information below from Tournment Sporting Goods's annual financial statements to calculate the actual and sustainable growth rate for each year from 2010 - 2014. b. Do you think Tournment Sporting Goods is having a problem financing its growth? Is the increase in dividends a good idea for the company? Tournment Sporting Goods ($ in thousands) 2009 2010 2011 2012 2013 2014 Sales 477.84 491.62 706.52 792.01 876.52 1,088.46 Net income - 43.27 26.31 38.48 44.84 25.76 Total assets - 477.06 648.42 664.26 697.16 982.63 Equity - 346.32 426.01 465.85 432.91 553.27 Dividends - - - 0.80 1.65 2.22 Chapter 4 a. Use the information below from Tournment Sporting Goods's annual financial statements to calculate the actual and sustainable growth rate for each year from 2010 - 2014. b. Do you think Tournment Sporting Goods is having a problem financing its growth? Is the increase in dividends a good idea for the company? Tournment Sporting Goods ($ in thousands) 2009 2010 2011 2012 2013 2014 Sales 477.84 491.62 706.52 792.01 876.52 1,088.46 Net income - 43.27 26.31 38.48 44.84 25.76 Total assets - 477.06 648.42 664.26 697.16 982.63 Equity - 346.32 426.01 465.85 432.91 553.27 Dividends - - - 0.80 1.65 2.22Explanation / Answer
a. Use the information below from Tournment Sporting Goods's annual financial statements to calculate the actual and sustainable growth rate for each year from 2010 - 2014.
b. Do you think Tournment Sporting Goods is having a problem financing its growth? Is the increase in dividends a good idea for the company?
Tournment Sporting Goods ($ in thousands)
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Sustainable Growth = Retention Ratio x Assets/Equity x ROA
Actual Growth Rate = (Next year sales - Previous year sales)/Previous year sales
If the actual growth rate is greater than sustainable growth, the company may run into trouble because of unrestrained growth. Increase in dividend would not help company.
a. Use the information below from Tournment Sporting Goods's annual financial statements to calculate the actual and sustainable growth rate for each year from 2010 - 2014.
b. Do you think Tournment Sporting Goods is having a problem financing its growth? Is the increase in dividends a good idea for the company?
Tournment Sporting Goods ($ in thousands)
2009 2010 2011 2012 2013 2014 Sales 477.84 491.62 706.52 792.01 876.52 1,088.46 Net income - 43.27 26.31 38.48 44.84 25.76 Total assets - 477.06 648.42 664.26 697.16 982.63 Equity - 346.32 426.01 465.85 432.91 553.27 Dividends-
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- 0.8 1.65 2.22 a) 2009 2010 2011 2012 2013 2014 Dividends-
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- 0.8 1.65 2.22 Net income - 43.27 26.31 38.48 44.84 25.76 Dividend Ratio = Dividend/ Net Income - - 2.08% 3.68% 8.62% Retention Ratio = 1 - Dividend Ratio 97.92% 96.32% 91.38% Return on Assets (ROA) 2009 2010 2011 2012 2013 2014 Net income - 43.27 26.31 38.48 44.84 25.76 Total assets - 477.06 648.42 664.26 697.16 982.63 ROA = Net income/Total Assets 9.07% 4.06% 5.79% 6.43% 2.62% Total assets - 477.06 648.42 664.26 697.16 982.63 Equity - 346.32 426.01 465.85 432.91 553.27 Assets/ Equity 1.378 1.522 1.426 1.61 1.776 Sustainable Growth 2010 2011 2012 2013 2014 Retention Ratio = 1 - Dividend Ratio 97.92% 96.32% 91.38% Assets/ Equity 1.378 1.522 1.43 1.61 1.78 ROA = Net income/Total Assets 9.07% 4.06% 5.79% 6.43% 2.62%Sustainable Growth = Retention Ratio x Assets/Equity x ROA
0.00% 0.00% 8.09% 9.98% 4.25% 2009 2010 2011 2012 2013 2014 Sales 477.84 491.62 706.52 792.01 876.52 1,088.46Actual Growth Rate = (Next year sales - Previous year sales)/Previous year sales
2.88% 43.71% 12.10% 10.67% 24.18%If the actual growth rate is greater than sustainable growth, the company may run into trouble because of unrestrained growth. Increase in dividend would not help company.
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