What are possible reasons the sustainable growth rate

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Unformatted text preview: ics” link to calculate the sustainable growth rate for Coca-Cola (KO) each year for the past four years. Is the sustainable growth rate the same for every year? What are possible reasons the sustainable growth rate may vary from year to year? 86 PART 1 Overview ros82361_ch03.indd ros82361_ch03.indd 86 7/7/08 3:59:10 PM Confirming Pages www.mhhe.com/rwj 4. External Funds Needed Look up Black & Decker (BDK). Under the “Financial Highlights” link you can find a five-year growth rate for sales. Using this growth rate and the most recent income statement and balance sheet, compute the external funds needed for BDK next year. W H AT ’ S O N T H E W E B ? 1. Du Pont Identity You can find financial statements for Walt Disney Company at Disney’s home page, disney.go.com. For the three most recent years, calculate the Du Pont identity for Disney. How has ROE changed over this period? How have changes in each component of the Du Pont identity affected ROE over this period? Ratio Analysis You want to examine the financial ratios for Dell Computer Corporation. Go to www.reuters.com and type in the ticker symbol for the company (DELL). Now find financial ratios for Dell and the industry, sector, and S&P 500 averages for each ratio. a. What do TTM and MRQ mean? b. How do Dell’s recent profitability ratios compare to their values over the past five years? To the industry averages? To the sector averages? To the S&P 500 averages? Which is the better comparison group for Dell: the industry, sector, or S&P 500 averages? Why? c. In what areas does Dell seem to outperform its competitors based on the financial ratios? Where does Dell seem to lag behind its competitors? d. Dell’s inventory turnover ratio is much larger than that for all comparison groups. Why do you think this is? 3. Applying Percentage of Sales Locate the most recent annual financial statements for Du Pont at www.dupont.com under the “Investor Center” link. Locate the annual report. Using the growth in sales for the most recent year as the projected sales growth for next year, construct a pro forma income statement and balance sheet. Based on these projections, what are the external funds needed? Growth Rates You can find the home page for Caterpillar, Inc., at www.cat.com. Go to the Web page and find the most recent annual report. Using the information from the financial statements, what is the sustainable growth rate? 2. 4. RATIOS AND FINANCIAL PLANNING AT EAST COAST YACHTS After Dan’s analysis of East Coast Yachts’s cash flow (at the end of our previous chapter), Larissa approached Dan about the company’s performance and future growth plans. First, Larissa wants to find out how East Coast Yachts is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company’s growth. In the past, East Coast Yachts experienced difficulty in financing its growth plan, in large part because of poor planning. In fact, the company had to turn down several large jobs because its facilities were unable to handle the additio...
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This note was uploaded on 10/28/2009 for the course FINA 505 taught by Professor Deborahcernauskas during the Summer '09 term at Northern Illinois University.

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