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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 Green Moose Industries: Green Moose Industries has no debt in its capital structure and has $150,000,000 in assets. Its sales revenues last year were $45,000,000 with a net income of $1,500,000. The company distributed $185,000 as dividends to its shareholders last year. Given the information above, what is Green Moose Industries's sustainable growth rate? 0.88% 2.04% 4.57% 0.12% 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 must issue the same number of new common shares that it issued last year. The firm maintains a constant ratio of liabilities to equity. The firm's total asset turnover ratio remains constant
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