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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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GROWTH RATES Sawyer Corporation’s 2015 sales were $5 million. Its 2010 sales were $2.5 million.

  1. a. At what rate have sales been growing?
  2. b. Suppose someone made this statement: “Sales doubled in 5 years. This represents a growth of 100% in 5 years; so dividing 100% by 5, we find the growth rate to be 20% per year.” Is the statement correct?

(a)

Summary Introduction

To compute: The growth rate of sales.

Growth Rate:

It consider as a percentage change in a particular value from the past to the present time period. It is important to measure the growth as it shows how well or how bad a company or an economy performing from its past.

Explanation

Given,

Sales in 2010 were $2.5 million and sales in 2015 were $5 million.

The formula to calculate growth rate is

Growth Rate=Current SalePrevious SalePrevious Sale×100

Substitute $5 million for current sale and $2.5 million for previous sale

(b)

Summary Introduction

To identify: If the given statement is true.

Growth Rate:

It consider as a percentage change in a particular value from the past to the present time period. It is important to measure the growth as it shows how well or how bad a company or an economy performing from its past.

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