Problem 1. Douglas Corporation is a leading auto supply depot headquartered in Dearborn, Michigan that trades...

Transcribed Image Text:

Problem 1. Douglas Corporation is a leading auto supply depot headquartered in Dearborn, Michigan that trades on the NASDAQ. Following is some data for Douglas for the period 2011-2015. Data Profit margin (%) Retention ratio 82.1 81.3 79.3 75.0 60.1 (%) Financial leverage (X) Asset turnover 0.7 0.7 0.7 0.7 (X) Growth rate in Sales (%) 2011 2012 2013 2014 2015 16.5 17.4 16.2 15.0 11.2 1.7 Data 0.1 Answer the following a, b, c, questions: a. Calculate the annual sustainable growth rate for Douglas from 2011 through 2015. Financial leverage (X) Profit margin 5.5 (%) 1.7 1.7 1.7 Retention ratio 100.0 (%) 8.9 b. What growth management challenge did Douglas face during these years? c. How did Douglas deal with its growth management challenge? Asset turnover 1.6 (X) Problem 2. Steuben Corporation is an American supplier of fabrics. Following is some data for the company for the period 2014-2018. 1.7 Growth rate in 18.1 sales (%) 13.5 4.2 2014 2015 2016 2017 2018 6.4 1.6 1.7 6.6 1.6 1.9 0.6 7.0 100.0 100.0 100.0 100.0 1.8 Answer the following a, b, c, questions: 4.2 1.6 1.8 7.0 1.5 1.9 24.2 38.4 24.6 27.1 a. Calculate the sustainable growth rate in 2018 for Steuben assuming a profit margin of 8.0%. b. Calculate the sustainable growth rate in 2018 assuming a financial leverage of 2.40 times. c. Calculate the sustainable growth rate in 2018 assuming both of these changes occur. Problem 1. Douglas Corporation is a leading auto supply depot headquartered in Dearborn, Michigan that trades on the NASDAQ. Following is some data for Douglas for the period 2011-2015. Data Profit margin (%) Retention ratio 82.1 81.3 79.3 75.0 60.1 (%) Financial leverage (X) Asset turnover 0.7 0.7 0.7 0.7 (X) Growth rate in Sales (%) 2011 2012 2013 2014 2015 16.5 17.4 16.2 15.0 11.2 1.7 Data 0.1 Answer the following a, b, c, questions: a. Calculate the annual sustainable growth rate for Douglas from 2011 through 2015. Financial leverage (X) Profit margin 5.5 (%) 1.7 1.7 1.7 Retention ratio 100.0 (%) 8.9 b. What growth management challenge did Douglas face during these years? c. How did Douglas deal with its growth management challenge? Asset turnover 1.6 (X) Problem 2. Steuben Corporation is an American supplier of fabrics. Following is some data for the company for the period 2014-2018. 1.7 Growth rate in 18.1 sales (%) 13.5 4.2 2014 2015 2016 2017 2018 6.4 1.6 1.7 6.6 1.6 1.9 0.6 7.0 100.0 100.0 100.0 100.0 1.8 Answer the following a, b, c, questions: 4.2 1.6 1.8 7.0 1.5 1.9 24.2 38.4 24.6 27.1 a. Calculate the sustainable growth rate in 2018 for Steuben assuming a profit margin of 8.0%. b. Calculate the sustainable growth rate in 2018 assuming a financial leverage of 2.40 times. c. Calculate the sustainable growth rate in 2018 assuming both of these changes occur.

Answer rating: 100% (QA)

To solve Problem 1 for Douglas Corporation we need to calculate the annual sustainable growth rate for the years 2011 through 2015 The sustainable gro... View the full answer