GG Co. shows the following information on its financial statements: interest-bearing debt is $900,000; shareholders equity (SE)

Question:

GG Co. shows the following information on its financial statements: interest-bearing debt is $900,000; shareholders’ equity (SE) is $2,500,000; sales are $5,050,000; net income is $685,750; dividends are $200,000; and sales growth (g) is 5 percent. Calculate EFR/S and discuss the relationship between dividend payout and EFR. Calculate the sustainable growth rate for GG Co. Discuss the relationship between profit margin and EFR.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...