Craftsman Inc., has a profit margin of 8%, an asset turnover ratio of
Craftsman Inc., has a profit margin of 8%, an asset turnover ratio of 2.3, a leverage ratio of 1.50 and a retention ratio of .60. What is the firm’s sustainable growth rate?
A) 3.13%
B) 8.70%
C) 16.56%
D) 46.00%
ANSWER
C
Explanation: C) Sustainable Growth = ROE * b = (8% * 2.3 * 1.5 ) * .60 = 16.56%
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