Financial Ethics& SEC IP

Comparing SGR

Jenny Olena Spears

CTU - FINC225

Unit 4 IP

Professor Keim

YEAR 2016	YEAR 2015	YEAR 2014	YEAR 2013
0.02422	0.0645	0.0322	0.00175

Working for SGR 2016

1. Utilization rate = 111794/321686 =0.3475

2. profitability rate = Income /sales = 45687/111794 =0.41

3. financial utilization rate = debt /equity = 29722/128249 = 0.232

4. ROE = 0.3475 * 0.41 * 0.232 = 0.033. Therefore the ROE for the company is 3.3%.

5. Dividend rate= Dividend divide by income = 12150 /45687= 0.2659

6. BUSINESS RETENTION RATE(BRR) = 100-26.59 =73.4

7. SGR = REO X BRR = 0.033 * 0.734 = 0.02422.

Working for SGR 2015

1. Utilization rate = 121985/290479 =0.4199

2. profitability rate = Income /sales = 53394/121988 =0.438

3. financial utilization rate = debt /equity = 53465/119355 = 0.445

4. ROE = 0.3475 * 0.41 * 0.232 = 0.0824. Therefore the ROE for the company is 8.24%.

5. Dividend rate= Dividend divide by income = 11561 /53394= 0.2165

6. BUSINESS RETENTION RATE(BRR) = 100-21.65 =78.35

7. SGR = REO X BRR = 0.0645

Working for SGR 2014

1. Utilization rate = 208111/231839 =0.8976

2. profitability rate = Income /sales = 39510/208111 =0.0.18985

3. financial utilization rate = debt /equity = 28987/111457= 0.2598

4. ROE = 0.04427.

5. Dividend rate= Dividend divide by income = 11126 /39510= 0.2659

6. BUSINESS RETENTION RATE(BRR) = 100-26.59 =0.728

7. SGR = REO X BRR = 0.0322

Working for SGR 2013

1. Utilization rate = 124447/207000 =0.601

2. profitability rate = Income /sales = 37037/124447 =0.02876

3. financial utilization rate = debt /equity = 16960/123459 = 0.13727

4. ROE = 0.00245Therefore the ROE for the company is 0.245

5. Dividend rate= Dividend divide by income = 10564 /37037= 0.285

6. BUSINESS RETENTION RATE(BRR) = 71.5

7. SGR = REO X BRR = 0.00175

When the firm grows at the rate, which is higher than the cost of equity, the value of share is likely to drop. This will mean that the cost per share becomes negative. Sustainable growth is the attainable growth that can be attained by the company without running into problems of debt and equity. A business that do not grow at all will stagnate. An SGR is the maximum growth rate that a company my register without having any financial help from outside. SGR is used to answer the question how much growth can a company grow without borrowing money from external source. In order to maintain growth, a company can maintain the following:

· Maintain the dividend paying ratio

· Increase sales rapidly as allowed by the market.

· Maintain the capital structure.

The reason why faster growth can harm a company, the ratio of sales and assets cannot grow faster than the retained earnings added to the debt, which the retained earnings could support (Sowinski, 2006). Must companies who do not want to offer new equity have sustainable growth? If the company was to offer an equity, it will affect the company’s growth rate. When growth rate exceeds the sustainable growth rate for long period, the company may have to decrease the ratio of assets to sales or increase the debt ratio in order to maintain the growth rate.

When the growth rate was above the sustainable rate, the company offered more debt then it decreased the sales to equity ratio. Another ratio, which changed, is the financial advantage. When the growth rate was higher, the company diversified the ways in which it had to sell more equity and get more debt. The reason for this is to reduce the dividend paid and increase the company profit margin. Any of the factors can increase the SGR ratio to a bigger value. Another way the company dealt with rapid growth rate and maintain sales as well as sustainable growth rate, a firm will need a new source of asset and this can be financed through increasing the equity of the firm through retained earnings (Gallinger, 2000). If this is not the case, profit margin is another way to increase SGR without increasing the owner’s equity, profit margin can be improved by improving the operation efficiencies and performances. .

References

Gallinger, George W. (2000). "Tax Effects on Profitability and Sustainable Growth." Business Credit.

Galpin, Timothy.(2013) Making Strategy Work: Building Sustainable Growth Capability. John Wiley & Sons.

Sowinski, Lara L. (2006)."The Trucking Industry's On a Roll—Or Is It? While demand in the sector remains strong, the state of the nation's infrastructure is threatening to put the brakes on sustainable growth." World Trade. March.