Asked by Tatiana Jones on Jun 29, 2024
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A firm has a payout ratio of 40 percent and a sustainable growth rate of 8.5%. The capital intensity ratio is 1.1 and the debt-equity ratio is.5. What is the profit margin?
A) 5.4%
B) 7.9%
C) 9.6 %
D) 11.9%
E) 14.4%
Payout Ratio
The percentage of net income distributed to shareholders in the form of dividends, representing the fraction of a company's earnings paid out.
Sustainable Growth Rate
The maximum rate at which a company can grow its earnings without needing to increase external financing.
Capital Intensity Ratio
refers to a financial ratio that measures the amount of fixed assets a company uses to generate its sales revenue, indicating the level of investment needed to maintain current sales levels.
- Comprehend the basic principles of internal and sustainable growth rates.
- Compute and elucidate the meaning of profit margin, total asset turnover, and debt-equity ratios.
Verified Answer
Learning Objectives
- Comprehend the basic principles of internal and sustainable growth rates.
- Compute and elucidate the meaning of profit margin, total asset turnover, and debt-equity ratios.
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