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Business, 14.10.2020 01:01 ZachLaVine2016

5. Sustainable growth 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 Caterpillar Garden Supplies Inc.: Green Caterpillar Garden Supplies Inc. has no debt in its capital structure and has $300,000,000 in assets. Its sales revenues last year were $180,000,000 with a net income of $3,000,000. The company distributed $100,000 as dividends to its shareholders last year. Given the information above, what is Green Caterpillar Garden Supplies Inc.’s sustainable growth rate? 2.9703558% 0.2935253% 0.98% 0.0333771% 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 uses all equity and no debt financing. The firm maintains a constant ratio of liabilities to equity. Common stock is the firm’s only form of equity.

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