a. Calculate Medifast’s sustainable growth rate for each year, from 2006 – 2010.
b. During the 2006-2010 period, was Medifast experiencing a fast or slow growth problem, and
what impact would this have had in the firm’s cash balances?
c. What did Medifast do to improve its sustainable growth rate during this period. Beyond simply
mentioning whether a ratio increased or decreased, explain what might cause the change the
ratio.
d. Referring to 2010 only:
i. What value for the profit margin would have brought Medifast into balanced growth?
ii. What value for asset turnover would have brought Medifast into balanced growth?
iii. What value for financial leverage would have brought Medifast into balanced growth?
Additionally, what % of assets was financed with equity given the leverage ratio of 1.6,
and what % of assets would have been financed with equity given your leverage ratio
consistent with balanced growth?
Problem #10 – Stryker
a. Calculate Stryker’s sustainable growth rate for each year, from 2009 – 2013.
b. During the 2009-2013 period, was Stryker experiencing a fast or slow growth problem, and what
impact would this have had in the firm’s cash balances?
c. What did Stryker do to improve its sustainable growth rate during this period. Beyond simply
mentioning whether a ratio increased or decreased, explain what might cause the change the
ratio.
d. Referring to 2013 only:
i. What value for the profit margin would have brought Stryker into balanced growth?
ii. What value for asset turnover would have brought Stryker into balanced growth?
iii. What value for financial leverage would have brought Stryker into balanced growth?
Additionally, what % of assets was financed with equity given the leverage ratio of 1.6,
and what % of assets would have been financed with equity given your leverage ratio
consistent with balanced growth?
iv. What value for the retention ratio would have brought Stryker into balanced growth?
What percent of earnings was Stryker paying out in Dividends in 2013, and what percent
would be called for with your revised retention ratio?
v. Of the revised ratios you just computed, which ratio(s) would Stryker be least likely to
implement and why?