Robert Half is a large temp employment provider.  The following are selected financial data for the company from 2000-2004.

a.    Calculate Robert Half’s sustainable growth rate in each year.

b.    Comparing the company’s sustainable growth rate with its actual growth rate in sales, what growth problems did the company face over this period?

1. Considering economic conditions over the period, what was a likely cause of these problems?
2. Robert Half paid its first dividends in 2004.  As an analyst, assess the company’s decision to pay dividends.
3. Calculate Robert Half’s sustainable growth in 2004 assuming a financial leverage ratio of 2.5.  If Robert Half adopts this leverage target, how would this change your answer in part (d)?

 

2000 2001 2002 2003 2004 Profit margin 6.89% 4.94% 0.11% 0.32% 5.25% Retention ratio 100.00 100.00 100.00 100.00 78.27 Asset turnover 2.78 2.47 2.03 2.00 2.23 Financial Leverage, T=A/E 4.69 1.38 1.16 1.32 1.52 Growth rate in sales 22.89% -10.05% -28.76% 3.55% 26.19%