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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
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 Bohemian Manufacturing Company: Bohemian Manufacturing Company has no debt in its capital structure and has $200,000,000 in assets. Its sales revenues last year were $100,000,000 with a net income of $5,000,000. The company distributed $120,000 as dividends to its shareholders last year. Given the information above, what is Bohemian Manufacturing Company's sustainable growth rate? 0 2.50% 0 0.06% 2.63% 1.08% Which of the following are assumptions of the sustainable (self-supporting) growth model? Check all that apply. The firm maintains a constant ratio of assets to equity The firm uses all equity and no debt financing. The firm maintains a constant net profit margin. The firm's total asset turnover ratio remains constant
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