In this article we will discuss about the internal and sustainable growth rates of a firm. Internal Growth Rate (IGR): ICR is the maximum growth rate a firm can achieve without going for external financing. All the financing requirements are met internally from the internal accruals. IGR can be expressed as follows: Where, ROA = Return on assets i.e. (PAT/Total [...]
EFR is calculated with the help of following formula, when other ratios remain constant: Where, A/S = Total assets/Sales Total assets include both current assets and fixed assets L/S = Current liabilities and provisions/Sales S = Sales of current year S1 = Projected sales of next year ΔS = Expected increase in sales over current year (S-S1) M = Net [...]
In this article we will discuss about the reasons for the replacement or retirement of an asset in a firm. To remain competitive, necessitates the timely replacement of existing assets and their eventual retirement. Replacement does not mean that an asset has to be duplicated at the end of its economic life, nor does it imply a like-for-like substitution. Instead, [...]