Crochet Supplies has a total asset turnover rate of 1.4, an equity multiplier of 1.3, a...

  

Transcribed Image Text:

Crochet Supplies has a total asset turnover rate of 1.4, an equity multiplier of 1.3, a profit margin of 7 percent, a retention ratio (b) of 0.6, and total assets of $100,000. Using the same data for Crochet Supplies plus Net Income is $9,800, what is Crochet's Internal Growth Rate? Hint: First find Crochet's ROA. Internal Growth Rate Internal growth rate is a formula for calculating the maximum growth rate a firm can achieve without external financing of any kind. ROA X b Internal Growth Rate (IGR) = %3D 1- (ROA X b) I ROA = Return on Assets I b = Retention ratio =1 - dividend payout ratio and Return on Equity = Net Income/Total Shareholder's Equity O 7.25% 5.88% 9.8% 6.25% Crochet Supplies has a total asset turnover rate of 1.4, an equity multiplier of 1.3, a profit margin of 7 percent, a retention ratio (b) of 0.6, and total assets of $100,000. Using the same data for Crochet Supplies plus Net Income is $9,800, what is Crochet's Internal Growth Rate? Hint: First find Crochet's ROA. Internal Growth Rate Internal growth rate is a formula for calculating the maximum growth rate a firm can achieve without external financing of any kind. ROA X b Internal Growth Rate (IGR) = %3D 1- (ROA X b) I ROA = Return on Assets I b = Retention ratio =1 - dividend payout ratio and Return on Equity = Net Income/Total Shareholder's Equity O 7.25% 5.88% 9.8% 6.25%

Answer rating: 100% (QA)

625 Workings ROA Net inc... View the full answer