Gaston Grooming Inc., has a sustainable growth rate of 17.28%. If the
Gaston Grooming Inc., has a sustainable growth rate of 17.28%. If the retention ratio is .60, the leverage ratio is 1.2 and the asset turnover ratio is 1.6, what was the firm’s profit margin?
A) 15.0%
B) 13.6%
C) 12.1%
D) 11.4%
ANSWER
A
Explanation: A) PM = SGG/(ATO * LR * b) = 17.28%/(1.6 * 1.2 * .60 ) = 15.0%
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