Question
A Vegetable Company has the following results: Net sales sh6,000,000 Net total assets sh4,000,000 Depreciation sh160,000 Net income sh400,000 Long-term debt sh2,000,000 Equity sh1,160,000 Dividends
A Vegetable Company has the following results:
Net sales sh6,000,000
Net total assets sh4,000,000
Depreciation sh160,000
Net income sh400,000
Long-term debt sh2,000,000
Equity sh1,160,000
Dividends sh160,000
Required:
a. Compute the Companys ROE directly.
%
b. Using the ROE computed in Part (a) above, what is the expected sustainable growth rate for the Company?
% c. Assuming the firms net profit margin went to 0.04, what would happen to the Companys ROE?
%
d. Using the ROE in Part c, what is the expected sustainable growth rate? (3 marks)
%
e. Using the ROE in Part c, what is the expected sustainable growth rate if dividends were only sh40,000?
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Auditing A Complete Guide
Authors: Gerardus Blokdyk
2023rd Edition
1038805538, 978-1038805539
