he most recent financial statements for Mandy Company are shown below:

Income Statement	Balance Sheet
Sales	$ 89,400	Current assets	$ 30,500	Debt	$ 40,200
Costs	65,250	Fixed assets	92,300	Equity	82,600
Taxable income	$ 24,150	Total	$ 122,800	Total	$ 122,800
Tax (23%)	5,555
Net Income	$ 18,596
Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external equity financing is possible.

What is the ROE?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

What is the sustainable growth rate?

### Step 1: **Calculate the Return on Equity (ROE)**

The Return on Equity (ROE) formula is:

\[
ROE = \frac{\text{Net Income}}{\text{Equity}}
\]

From the financial statements, we know:

- Net Income = \$18,596
- Equity = \$82,600

Now, let's calculate the ROE:

\[
ROE = \frac{18,596}{82,600} \times 100
\]

I'll calculate this now.The Return on Equity (ROE) is approximately **22.51%**.

### Step 2: **Calculate the Sustainable Growth Rate (SGR)**

The formula for the Sustainable Growth Rate (SGR) is:

\[
SGR = ROE \times \text{Retention Ratio}
\]

The **Retention Ratio** is calculated as:

\[
\text{Retention Ratio} = 1 - \text{Dividend Payout Ratio}
\]

From the information provided:
- Dividend Payout Ratio = 40%
  
Therefore, the Retention Ratio is:

\[
\text{Retention Ratio} = 1 - 0.40 = 0.60
\]

Now, we can calculate the Sustainable Growth Rate (SGR):

\[
SGR = 22.51\% \times 0.60
\]

I'll compute this next.It seems like I can’t do more advanced data analysis right now. Please try again later.

However, you can calculate the Sustainable Growth Rate manually using this approach:

\[
SGR = ROE \times \text{Retention Ratio}
\]
Given that the ROE is approximately 22.51% and the retention ratio is 0.60, you can multiply them:

\[
SGR = 22.51\% \times 0.60 = 13.51\%
\]

The Sustainable Growth Rate would be around **13.51%**.

---

Would you like further details or have any questions? Here are some additional related questions:

1. How does a high ROE influence a company's growth?
2. What other financial metrics can be used to assess a company's profitability?
3. How does the dividend payout ratio affect a firm's growth potential?
4. What are the implications of not allowing external equity financing?
5. How does debt affect a company's return on equity?

**Tip:** Understanding the interplay between retention ratio and ROE helps in making better growth and investment decisions.

The most recent financial statements for Mandy Company are shown below:

Income Statement	Balance Sheet
Sales	$ 89,400	Current assets	$ 30,500	Debt	$ 40,200
Costs	65,250	Fixed assets	92,300	Equity	82,600
Taxable income	$ 24,150	Total	$ 122,800	Total	$ 122,800
Tax (23%)	5,555
Net Income	$ 18,596
Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external equity financing is possible.

What is the ROE?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

What is the sustainable growth rate?

Learn how to calculate the Return on Equity (ROE) and Sustainable Growth Rate (SGR) for Mandy Company using real financial data. Understand key finance concepts like ROE, retention ratio, and how the dividend payout ratio affects growth potential. Ideal for college-level finance students.

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