Question

YOUR TURN! 3.5 The following data was taken from the financial records of the Whitney Lumber Company: 2013 2014 2015 2016 $1,500 135 $1,967 192 G Sales revenue...... Net income. . . . . . . . . . . Total assets. . . . . . . . . . . . Stockholders' equity..... Dividends ................... $1,725 154 1,430 931 1,300 1,645 $2,261 217 1,727 1,290 27 800 20 23 1,100 23 Required: 1. Compute the growth in sales revenue each year from 2013 through 2016. 2. How does this growth rate correspond to Whitney's sustainable growth rate for the same period? The solution is on page 107.

Answer 1

Year	Sales revenue	Growth	Growth rate	Total assets	Equity	Debt	Debt Growth
2013	1,500	0	0.00%	1,300	800	500	0
2014	1,725	225	15.00%	1,430	931	499	-1
2015	1,967	242	14.03%	1,645	1,100	545	46
2016	2,261	294	14.95%	1,727	1,290	437	-108

We can clearly see that the growth in Sales revenue is sustainable as the debt remains almost constant between the years. The company is thus resulting in a growth in sales revenue from its own equity invested.

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