N. (16 points) Use Law Specialists\' selected financial information above to ans

Question

N. (16 points) Use Law Specialists' selected financial information above to answer the following questions: Law Specialists, Inc. Selected financial information Profit margin (%) Retention ratio (%) Asset turnover (X) Financial leverage (X) 2010 2011 2012 20132014 6.89 4.94 0.11 0.32 5.25 100.00 100.00 100.00 100.00 78.27 2.78 2.47 2.03 2.00 2.23 1.69 1.38 1.16 1.32 1.52 Growth rate insales (%) 22.89-10.05-28.76 3.55 26.19 a. Calculate Law Specialists' sustainable growth rate in each year. b. Comparing the company's sustainable growth rate with its actual growth rate in sales, what growth problems did the company face over this period?

Explanation / Answer

Answer a:

Sustainable growth rate = Return on equity x Business retention rate

                                   or,

Sustainable growth rate = Retention Ratio X Return on Equity

Year Retention rate Return on Equity Sustainable Growth Rate 2010 100 1.64 164.5 2011 100 1.79 179.0 2012 100 1.75 175.0 2013 100 1.52 151.5 2014 100 1.47 146.7

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.