finance question

2013-03-13 3:24 am

ADP, Inc., is a manufacturer ofspecialty circuit boards in the personal computer industry. The firm hasexperienced phenomenal sales growth over its short five-year life. Selectedfinancial statement data are found in the following table: 2003 2002 2001 2000 1999 Sales Net income Assets Dividends Common equity Liabilities Liabilities and equity $3,000 150 2,700 60 812 1,888 2,700

$2,200 110 1,980 44 722 1,258 1,980 $1,800 90 1,620 36 656 964 1,620 $1,400 70 1,260 28 602 658 1,260 $1,200 60 1,080 24 560 520 1,080

Calculate ADP’s sustainable rate of growth for each of the five years of its existence. Compare the actual rates of growth in sales to the firm’s sustainable rates calculated in part a. How has ADP been financing its growing asset needs?

回答 (1)

Edward Y

2013-03-13 7:11 pm

✔ 最佳答案

2003 2002 2001 2000 1999 Sales $3,000 $2,200 $1,800 $1,400 $1,200 Net income 150 110 90 70 60 Assets 2,700 1,980 1,620 1,260 1,080 Dividends 60 44 36 28 24 Common equity 812 722 656 602 560 Liabilities 1,888 1,258 964 658 520 Liabilities and equity 2,700 1,980 1,620 1,260 1,080 dividend Payout Ratio= Div / NI 0.4 0.4 0.4 0.4 0.4 dividend Cover = 1 - Div Payout 0.6 0.6 0.6 0.6 0.6 ROE = Net Income / Equity 0.18 0.15 0.14 0.12 0.11 Sustainable Rate of Growth 0.11 0.09 0.08 0.07 0.06 (= divident cover X ROE) Sales Growth Rate 0.36 0.22 0.29 0.17 Debt to Sales Ratio 0.63 0.57 0.54 0.47 0.43 Debt Equity Ratio 2.33 1.74 1.47 1.09 0.93 (1) Sustainable Rate of Growth: See Above (2) Sales Growth Rate: See Above Sales have been funded by debt: See Debt to Sales Ratio above.

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