Gremlin Media Inc. has realized tremendous growth in recent years. Las

Gremlin Media Inc. has realized tremendous growth in recent years. Last year the firm realized an ROE of 41.16%.

If the firm was in a 40% marginal tax bracket, had an asset turnover ratio of 2.1, a profit margin of 14%, and a leverage ratio of 2, what was the firm’s retention ratio?
A) 0.70
B) 1.00
C) 0.50
D) There is not enough information to answer this question.

ANSWER

D
Explanation: D) You need the firm’s sustainable growth rate to answer this question.