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Abbreviated financial statements for Archimedes Levers are shown in the table below. Suppose that sales raise by 10% in 2014 and all other items, comprising debt, rise correspondingly.

Income Statement
Sales                                         $4,000

Costs, including interest              3,500

Net Income                                   $500

Balance Sheet, Year-end

2013 2012 2013 2012

Assets $3,200    $2,700              Debt $1,200             $1,033

Equity   2,000      1,667

Total $3,200        $2,700             Total $3,200       $2,700

Problem:

A.) If the payout ratio is set at 50% and no external debt or equity is to be issued, what is the maximum potential growth rate for Archimedes?

B.) If the payout ratio is set at 50% and the firm maintains a fixed debt ratio but issues no equity, what is the maximum probable growth rate for Archimedes?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93460

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