Here are the abbreviated financial statements for Planner’s Peanuts: INCOME STATEMENT, 2019 Sales $ 8,600 Cost 7,100 Net income $ 1,500 BALANCE SHEET, YEAR-END 2018 2019 2018 2019 Assets $ 6,500 $ 7,000 Debt $ 853 $ 1,000 Equity 5,647 6,000 Total $ 6,500 $ 7,000 Total $ 6,500 $ 7,000 Assume the payout ratio is 50%. Calculate the internal growth rate where no external debt or equity is to be issued. Note: Do not round intermediate calculations. Enter your answer as a whole percent. Calculate the sustainable growth rate where the firm maintains a fixed debt ratio but issues no equity. Note: Do not round intermediate calculations. Enter your answer as a whole percent.
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
Here are the abbreviated financial statements for Planner’s Peanuts:
| INCOME STATEMENT, 2019 | |
| Sales | $ 8,600 |
|---|---|
| Cost | 7,100 |
| Net income | $ 1,500 |
| BALANCE SHEET, YEAR-END | |||||
| 2018 | 2019 | 2018 | 2019 | ||
|---|---|---|---|---|---|
| Assets | $ 6,500 | $ 7,000 | Debt | $ 853 | $ 1,000 |
| Equity | 5,647 | 6,000 | |||
| Total | $ 6,500 | $ 7,000 | Total | $ 6,500 | $ 7,000 |
Assume the payout ratio is 50%.
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Calculate the internal growth rate where no external debt or equity is to be issued.
Note: Do not round intermediate calculations. Enter your answer as a whole percent.
-
Calculate the sustainable growth rate where the firm maintains a fixed debt ratio but issues no equity.
Note: Do not round intermediate calculations. Enter your answer as a whole percent.
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