question and answer 51

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1-New Tek has a sustainable growth rate of 11.2 percent. However, the firm’s managers are determined that the firm should grow by at least 20 percent next year. What must the firm do if the managers are to reach their desired level of growth for the firm?

2-State the assumptions that underlie the sustainable growth rate and interpret what the sustainable growth rate means.

3-Suppose a firm calculates its external financial need for a growth rate of 10 percent and finds that the need is a negative value. What are the firm’s options in this case?

4-Suppose a firm calculates its external financial need for a growth rate of 10 percent and finds that the need is a negative value. What are the firm’s options in this case?

5-Which is a more meaningful measure of profitability for a firm, return on assets or return on equity? Why?

6-Ladders Inc has a net profit margin of 5% on sales of$50 million. It has a book value of equityof $40 million and total liabilities of $30 million. Calculate Ladders’ ROE & ROA.

 
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