The following table presents financial information for Boss Stores, Inc., a reta

Question

The following table presents financial information for Boss Stores, Inc., a retail chain store in the U.S.

Use the information from Boss's annual financial statements. What is the difference between the sustainable growth and actual growth rates for 2013?

A. 7.83%

B. - 11.40%

C. 12.49%

D. - 7.09%

E. -3.04%

A. 7.83%

B. - 11.40%

C. 12.49%

D. - 7.09%

E. -3.04%

Boss Stores, Inc Selected financial information (S millions) 2011 2012 2013 Sales Net income Total assets Equity Dividends 2014 $287.31 $339.19 $411.78 $446.84 12.23 268.58275.30 318.43 451.32 180.63 191.90 211.03 222.57 0.69 11.22 16.48 19.70 0.00 5.21 0.58

Explanation / Answer

Sustainable growth rate means maximum rate of growth that organisation can sustain without looking for any outside finance.

It can be caluclated as below

=ROE*(1-dividend Payout ratio)

=10.71(1-2.94%)

=-20.82%

(Here ROE = equity/net Income and Dividend Payout ratio= Dividend/Net income*100)

Actual Growth rate in the company is increse in sales figures over a period of time. hence the actual growth rate is

=(411.78-339.19)/339.19*100

=21.40%

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