Financial statements analysis and financial models(question answers) Assignment

Financial statements analysis and financial models(question answers) - Assignment Examplea company, without seeking for debt finance, the following atomic number 18 two ways a company can adopt in order to increase the sustainable growing rate first, the utility rate of assets should be increased in order to increase the taxation generated, thus, increase the moolah income. An increase in the net income increases both the ROE and the payout ratio. Second, the company can wager on either retained earnings or righteousness finance to fund the undertakings of projects with positive net present value.ROE = Profit margin*Total asset turnover*equity multiplier = (0.55*1.9*0.063) = 6.5835%. sustainable growth = (ROE*b)/1- (ROE*b). 0.09 = (0.065835b)/ 1 (0.065835b). b = 1.2546 = (1 payout ratio). Therefore, payout ratio = (1.2546 1) = 25.46%. Consequently, for the growth rate to be achieved, the dividend payout ratio must be 25.46%. The interpretation means that the company will use 25.46% of the net income to fund dividend payment.The approximate sustainable growth rate SGR = (ROEb)/1- (ROEb). ROE = (Net income/equity) = (95,000/230,000) = 41.30%. The payout ratio = (42,000/95,000) = 44.21%. Therefore, SGR = (0.413*0.4421)/1 (0.413* 0.4421) = 0.1826/ (1- 0.1826) = 22.34%. The exact sustainable growth rate = 22.339124%. Since the value of equity never changed during the period, the ROE is remains unchanged. Therefore, the approximate sustainable growth rate is similar to the above fit(p)