hey Guys, How would one work out if the following is to be considered true… If the dividend payout ratio is 40%, the profit margin is 12%, asset turnover is 1.45 times, and asset/equity leverage factor is 2.2, the industry’s projected growth rate is approximately 23%. cheers
Take it this way ROE=Net Profit Margin *Total Asset t/o* Asset to Equity Ratio ROE=0.12*1.45*2.2=0.3828 Dividend payout is 0.4 so retention rate is (1-0.4)=0.6 Growth g =ROE*Retention Rate=0.3828*0.6=0.22968 Which is equal 22.97% or nearly 23%
Many thanks, Patel : )