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As a firm grows, it must support increases in revenue with new investments in assets. The sustainable, or self-supporting, growth model helps a firm assess
As a firm grows, it must support increases in revenue with new investments in assets. The sustainable, or self-supporting, 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 this case: Green Caterpillar Garden Supplies Inc. has no debt in its capital structure and has $150 million in assets. Its sales revenues last year were $90 million with a net income of $10 million. The company distributed $1.70 million as dividends to its shareholders last year. What is the firm's sustainable growth rate? 1.82% 5.86% 8.46% 1.15% Which of the following are assumptions of the sustainable (self-supporting) growth model? Check all that apply. The firm uses all equity and no debt financing. Common stock is the firm's only form of equity. The firm maintains a constant ratio of liabilities to equity. The firm must issue the same number of new common shares that it issued last year
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