Question

Lauren Turk is reviewing Francesca Toy's financial statements in order to estimate its sustainable growth rate. Using the information presented in Exhibit:


a. (1) Identify and calculate the three components of the DuPont formula.
(2) Calculate the ROE for 2011, using the three components of the DuPont formula.
(3) Calculate the sustainable-growth rate for 2011.
b. Turk has calculated actual and sustainable growth for each of the past four years and finds in each year that its calculated sustainable-growth rate substantially exceeds its actual growth rate. Cite two courses of action (other than ignoring the problem) that Turk should encourage Francesca Toy to take, assuming the calculated sustainable-growth rate continues to exceed the actual growthrate.


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  • CreatedDecember 17, 2014
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