Defining Internal Growth Rate & Computing Plowback Ratio
Assets and costs are proportional to sales. Debt & equity are not. Filer Manufacturing Co. maintains a constant 40% dividend payout ratio. No external financing is possible. What is the internal growth rate?
How do I determine the addition to retained earnings to compute the plowback ratio?
Attached is the income statement and balance sheet.© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/finance/defining-internal-growth-rate-computing-plowback-ratio-24l
...o, via spending a part of it and retaining the rest.
This is exactly what companies do, they payout a part of the Net Income as Dividends to the shareholders and retain the rest and we call it Retained Earnings.
The equation is: (ROA x b)/(1-ROA x ...