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5. Sustainable growth As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting, or sustainable, growth model helps
5. Sustainable growth As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting, or sustainable, growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider the following case of Cold Duck Manufacturing Inc.: Cold Duck Manufacturing Inc. has no debt in its capital structure and has $200,000,000 in assets. Its sales revenues last year were $80,000,000 with a net income of $2,000,000. The company distributed $200,000 as dividends to its shareholders last year. Given the information above, what is Cold Duck Manufacturing Inc.'s sustainable growth rate? O 0.82% O 0.91% 4.85% O 0.10% Which of the following are assumptions of the sustainable (self-supporting) growth model? Check all that apply. The firm maintains a constant net profit margin. The firm maintains a constant ratio of liabilities to equity. U The firm pays no dividends. O Common stock is the firm's only form of equity
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