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You are considering investing in Annie’s Eatery. You have been able to locate the following information on the firm: Total assets are $35.2 million, accounts receivable are $6.04 million, ACP is 30 days, net income is $4.25 million, debt-to-equity is 1.6 times, and dividend payout ratio is 43 percent. All sales are on credit. Annie’s is considering loosening its credit policy such that ACP will increase to 35 days. The change is expected to increase credit sales by 4 percent. Any change in accounts receivable will be offset with a change in debt. No other balance sheet changes are expected. Annie’s profit margin and dividend payout ratio will remain unchanged.

Calculate the sustainable growth rate for Current and new year and also indicate the change in these numbers?

Financial Management, Finance

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