EFN and Growth Rates Broslofski Co, maintains a positive retention ratio and keeps its debt-equity ratio constant every year when sales grow by 20 percent, the firm has a negative projected EFN: What does this tell you about the firm’s sustainable growth rate? Do you know, with certainty, if the internal growth rate is greater than or less than 20 percent? Why? What happens to the projected EFN if the retention ratio is increased? What If the retention ratio is decreased? What if the retention ratio is zero? Use the following information to answer the next six questions: A small business called The Grandmother Calendar Company began selling personalized photo calendar kits. The kits were a hit, and sales soon sharply exceeded forecasts. The rush of orders created a huge backlog, so the company leased more space and expanded capacity; but it still could not keep up with demand. Equipment failed from overuse and quality suffered. Working capital was drained to expand production, and, at the same time, payments from customers were often delayed until the product was shipped. Unable to deliver on orders, the company became so strapped for cash that employee paychecks began to bounce. Finally, out of cash, the company ceased operations entirely three years later.
Internal Growth Rate "An internal growth rate (IGR) is the highest level of growth achievable for a business without obtaining outside financing, and a firm's maximum internal growth rate is the level of business operations that can continue to fund and grow the...
Students also viewed these Corporate Finance questions
Use the following information to answer the next three questions. Selected values taken from...... ... gross $30,000 Cost of Goods Sold $19,000 Credit Sales, gross $60,000 Interest Expense $8,000 Credit Collections (net of discount, from collection schedule) $85,000 Tax Expense $5,040 Sales...
Use the following information to answer questions (a) through (c) below. a. How much cash was received from customers during 2014?b. How much cash was paid for merchandise during 2014?c. How much cash was paid for operating expenses during2014?
Use the following information to answer questions (a) through (e) below. a. How much cash was received from customers during 2014?b. How much cash was paid for merchandise during 2014?c. How much cash was paid for operating expenses during 2014?d. How much cash was paid for income taxes during...
The asteroid 243 Ida has its own small moon, Dactyl. (See the photo on p. 394.) Another such system, asteroid 624 Hektor, has a mass of 7.9 × 1018 kg, with its moon orbiting at a radius of 623.5 km and a period of 2.965 days. (a) Given that the orbital radius of Dactyl is 108 km, and its period is...
The 1-in.-diameter rod is subjected to the loads shown. Determine the state of stress at point B, and show the results on a differential volume element located at this point.
Ottawa University sold 15,000 season football tickets at $80 each for its six-game home schedule. What entries should be made? (a) When the tickets were sold, (b) After each game?
Callouts Determination 1. \"...although pass adjustment due to immateriality.\" Retain the original text. Replace with \"We should propose an adjusting entry as of 12/31/year 5 debiting cash and crediting miscellaneous revenues as net income is understated as of 12/31/year 5.\" 4.09 points 2. \"No...
If the appropriate discount rate for the following cash flows is 8.5 percent compounded quarterly, what is the present value of the cash flows? Year ............ Cash Flow1 ............ $ 8152 .............. 9903 .................. 04 ............. 1,520
External Financing Needed Testaburger, Inc., uses no external financing and maintains a positive retention ratio. When sales grow by 15 percent, the firm has a negative projected EFN. What does this tell you about the firm’s internal growth rate? How about the sustainable growth rate? At this...