1 / 5

NOTATION

NOTATION. A/S = increase in assets per $ increase in sales. L/S = increase in spontaneous liabilities per dollar increase in sales. S 0 = current level of sales. g = projected growth rate in sales. M = net profit margin on sales. d = dividend payout ratio.

ceana
Télécharger la présentation

NOTATION

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. NOTATION • A/S = increase in assets per $ increase in sales. • L/S = increase in spontaneous liabilities per dollar increase in sales. • S0 = current level of sales. • g = projected growth rate in sales. • M = net profit margin on sales. • d = dividend payout ratio. • B/E = ratio of int.-bearing debt to equity

  2. ADDITIONAL FUNDS NEEDED (AFN) AFN = (A/S)gS0Required increase in assets – (L/S)gS0Increase in spontaneous liabilities – MS0(1+g)(1-d)Flow of retained earningsfor the year – (B/E)(MS0)(1+g)(1-d) Increase in external debt

  3. SUSTAINABLE GROWTH RATE • The maximum rate at which the firm can grow without changing its capital structure and without issuing new equity • To find the sustainable growth rate, set AFN = 0 and solve for g:

  4. SUSTAINABLE GROWTH FOR GI

  5. AFN AND GROWTH RATE

More Related