Sustainable growth rate analysis

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Baxter Inc. is in a fast growing industry, but doesn't seem to be able to match its competitors' growth rates. Selected financial information for Baxter is as follows ($000):

Sales $20,000 NI $1,000 Total Assets $10,000 Equity $8,000 Annual dividend $700.Research has revealed that the average firm in Baxter's industry pays out 10% of its earnings in dividends, earns 4 cents after tax on every sales dollar, has an equity multiplier of 3.0, and a total asset turnover of 1.9.

Use a sustainable growth rate analysis in the following table to determine the source(s) of Baxter's growth problem.

gs =

Retention Ratio

Return on Sales

Total Asset Turnover

Equity Multiplier Industry Baxter

Reference no: EM131803287

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