Recent financial statements for alexander come to me or shown here. Income state
ID: 2779898 • Letter: R
Question
Recent financial statements for alexander come to me or shown here.
Income statement
Sales – $53, 500
Cost – 41, 800
Taxable income 11,700
Taxes (34%) 3978
Net income 7722
Balance sheet
Current assets 19,000
Fixed asset 72,000
Total 91,000
Long term debt 43,000
Equality 48,000
Total 91,000.
Acids and costs are proportional to sales. The company maintains a consistent 30% dividend payout ratio and consistent debit equality ratio. What is the maximum increase in sales that can be so stained assuming no new quality is issued.
Explanation / Answer
Return on equity = Net income / Total equity
= $7722 / $48000
= 0.1609 or 16.09%
Plowback ratio = 1 - dividend payout ratio
= 1 - 0.3
= 0.7 or 70%
Sustainable growth rate = (0.1609 * 0.7) / [1-(0.1609*0.7)]
= 0.11263 / 0.88737
= 0.1269 or 12.69%
Maximum increase in sales = $53500 * 0.1269
= $6789.15.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.