Question

2 a. Use the information below from Toumment Sporting Goods's annual financial statements to calculate the actual and sustainable growth rate for each year from 2010 2014 3 b. Do you think Tournment Sporting Goods is having a problem financing its growth? Is the increase in dividends a good idea for the company? Tournment Sporting Goods (S in thousands) 2009 2010 2011 2012 2013 2014 8 Sales 9 Net income 10 Total assets 11 Equity 12 Dividends 13 477.84 491.62706.52792.01876.52 1,088.46 25.76 477.06648.42 664.26 697.16 982.63 346.32 426.01 465.85 432.91 553.27 2.22 43.27 26.31 38.48 44.84 0.80 1.65

Answer 1

Answer(a): Growth rate in Sales:

Year	Calculation	Growth rate
2010	491.62-477.84 / 477.84	2.88%
2011	706.52-491.62 / 491.62	43.71%
2012	792.01-706.52/706.52	12.10%
2013	876.52-792.01 / 792.01	10.67%
2014	1088.46-876.52 / 876.52	24.18%

Sales is increasing year on year.

Net Income- It came down in 2011 and went up in 2012 and 2013 and again came down in 2014. Net income came down,it may be due to heavy expenditures.

Equity- It is increasing year on year.

Answer(2): No, I do not think so. Sales is increasing year on year so as the growth rate. It may be higher in some year or lower in another year but increasing significantly.

Increase in dividend is good idea as it is good for shareholders, company is also retaining some amount as retained earnings (we can figure out because equity number is increasing). Company should distribute dividend but it should take into consideration the net income while distributing dividend, if in any year, net income is less, it can pay less dividend and if net income is more than good amount of dividend can be paid.